Barjuca et al v. Omega Flex, Inc. et al
Filing
36
MEMORANDUM OPINION AND ORDER: (1) 18 Motion for Summary Judgment is GRANTED IN PART, in so far as Plas' claims for breach of contract must be dismissed and DENIED IN PART in so far as Plas' claim of bad faith is not dismissed. (2) Plas' breach of contract claim is DISMISSED WITH PREJUDICE. (3) 22 Motion in Limine is DENIED AS MOOT. Signed by Judge Joseph M. Hood on 12/17/2013. (SCD)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
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CHRISTIAN BARJUCA and
VICKI BARJUCA,
Plaintiffs,
v.
STATE FARM FIRE AND
CASUALTY COMPANY,
Civil Case No.
5:11-cv-380-JMH-REW
MEMORANDUM OPINION
AND ORDER
Defendant.
***
This matter is before the Court upon Defendant’s Motion for
Summary
Judgment.
[D.E.
18].
Plaintiff
has
filed
a
Response
[D.E. 28], and Defendant filed its Reply. [D.E. 31]. This matter
being fully briefed, and the Court being otherwise sufficiently
advised, it is now ripe for the Court’s review.
I. Procedural Background
Plaintiffs, Christian and Vicki Barjuca, owned a home at
102 Wind Ridge Road in Nicholasville, Kentucky. [D.E. 1-1 at 2].
On August 4, 2009, a lightning strike caused a gas line in the
home to rupture, starting a fire in the Barjuca home. [D.E. 34-2
at 3-5; 35-1 at 5]. The fire caused extensive damage. Plaintiffs
held a homeowners insurance policy with Defendant State Farm
Fire & Casualty Company. [D.E. 18-11, 18-12, 18-13].
Pursuant
to the policy, State Farm covered the cost to repair the home,
albeit
after
a
lengthy
dispute,
and
living
expenses
during
reconstruction of the home. See [D.E. 18-4 at 6-7]. Plaintiffs
do not dispute that State Farm has met its obligations under the
policy for repairing the home and for paying living expenses.
[D.E. 34-6 at 6-7; 35-1 at 12-13].
After the fire, Servpro, a restoration company, came to the
Barjuca residence in an attempt to mitigate the damage. [D.E.
34-4 at 1-2]. This included water and smoke mitigation efforts,
as well as packing up personal property and storing it in a
Servpro
warehouse.
Id.
Plaintiffs
were
allowed
to
visit
the
Servpro warehouse to inventory the personal property contained
in the boxes [D.E. 34-6 at 10; 35-2 at 1] but contend that they
could not discover the true nature of the damage to the stored
items until they moved back into their home. [D.E. 34-7 at 7-10;
35-2 at 1-2]. Plaintiffs moved back into their home eighteen
months
after
Defendant
the
fire.
disagree
[D.E.
34-3
the
damage
about
at
to
1].
Plaintiffs
items
of
and
personal
property and the amount which Plaintiffs are owed under the
policy, prompting Plaintiffs to file this suit.
Plaintiffs filed their Complaint in Jessamine Circuit Court
on August 3, 2011, asserting claims for breach of contract and
bad faith against State Farm, as well as various claims against
the manufacturer and installer of the alleged faulty gas line.
[D.E.
1-1].
The
Jessamine
Circuit
2
Court
severed
the
claims
against State Farm from the product liability claims. [D.E. 1-3
at 6]. Defendant then removed the action to this Court. [D.E.
1]. The Court construed a section of the parties’ joint status
report
as
a
claims
from
joint
motion
Plaintiffs’
to
bad
bifurcate
faith
Plaintiffs’
claims,
and
contract
granted
that
motion. [D.E. 7]. Thus, discovery on the bad faith claims was
stayed, and the parties were ordered to conduct discovery on the
breach
of
judgment
contract
on
the
claims.
breach
of
Defendant
contract
now
claim
moves
and
for
the
summary
bad
faith
claim.
Defendant asserts that summary judgment should be granted
because
Plaintiffs
filed
their
claims
outside
the
one-year
limitations period contained within the insurance policy. [D.E.
18-1
at
8-11].
Plaintiffs
contend
the
one-year
limitations
period within the policy should not be enforced because the one
year period is unreasonable, the contractual limitations period
should be excused due to impossibility of performance, and that
State
Farm
should
be
equitably
estopped
from
asserting
the
limitations period as a defense. [D.E. 28 at 4].
II. Standard of Review
A motion for summary judgment may only be granted “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). “On summary judgment the inferences to be
3
drawn from the underlying facts . . . must be viewed in the
light most favorable to the party opposing the motion.” United
States v. Diebold, Inc., 369 U.S. 654, 655 (1962). “The plain
language of Rule 56(c) mandates the entry of summary judgment,
after adequate time for discovery and upon motion, against a
party who fails to make a sufficient showing to establish the
existence of an element essential to that party’s case, and on
which
that
party
will
bear
the
burden
of
proof
at
trial.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
III. Analysis
The one-year contractual limitations period is reasonable
and is neither excused through impossibility of performance, nor
is
State
Therefore,
Farm
estopped
summary
from
judgment
asserting
for
it
Defendant
as
on
the
a
defense.
breach
of
contract claim is appropriate.
Plaintiffs
limitations
unreasonable.
first
period
[D.E.
contend
should
26
at
that
not
4].
be
the
one-year
enforced
Defendant
contractual
because
claims
it
that
is
the
provision is reasonable because a long line of Kentucky cases
have upheld similar one-year contractual limitation periods in
insurance contracts. [D.E. 31 at 3-4].
“As a general rule, the construction and legal effect of an
insurance contract is a matter of law for the court.” Bituminous
Cas. Corp. v. Kenway Contracting, Inc., 240 S.W.3d 633, 638 (Ky.
4
2007) (citations omitted). An insurance contract “must receive a
reasonable interpretation consistent with the parties’ object
and intent or narrowly expressed in the plain meaning and/or
language of the contract.” St. Paul Fire & Marine Ins. Co. v.
Powell-Walton-Milward, Inc., 870 S.W.2d 223, 226 (Ky. 1994). “In
Kentucky, there is no statute proscribing contractual shortening
of limitations periods. In fact, there is a provision in the
Insurance Code, KRS 304.14-370, which allows foreign insurers to
limit actions against them to one year.” Webb v. Ky. Farm Bureau
Ins. Co., 577 S.W.2d 17, 18 (Ky. Ct. App. 1978). “In addition to
the
code
provision,
there
is
a
solid
line
of
case
law
in
Kentucky that upholds the validity of contractual terms that
provide for shorter limitation periods than the general statute
of limitations.” Id. at 19. If the insurer includes a shorter
limitations
period,
it
will
only
be
enforced
if
it
is
“reasonable and not otherwise prohibited by statute.” Brown v.
State Auto, 189 F. Supp. 2d 665, 668-69 (W.D. Ky. 2001) (citing
Webb, 577 S.W.2d at 18-19); see also Hobbs v. Am. Sec. Ins. Co.,
No. 3:08-cv-471-TBR, 2009 WL 366325, at *2 (W.D. Ky. Feb. 13,
2009)
(citations
understanding,
omitted)
the
(“Under
only
a
way
the
limitations
Sixth
Circuit’s
clause
would
be
unenforceable under Kentucky law would be if it did not leave
the insured a reasonable time in which to sue.”). If the one
year
limitation
period
within
5
the
contract
is
reasonable,
Defendant’s motion for summary judgment must be granted. If the
one-year limitation period is unreasonable, the Court must apply
the fifteen year statute of limitations governing contracts, and
Defendant’s
motion
for
summary
judgment
must
be
denied.
See
Brown v. State Auto, 189 F. Supp. 2d at 668 (“[I]f the two year
contractual
limitation
in
the
policy
is
reasonable,
the
Plaintiff’s complaint is time barred and must be dismissed. If
the
limitation
is
unreasonable,
the
fifteen
year
statute
of
limitations governing actions on written contracts applies and
the Plaintiff’s claims may proceed.”); see also KRS 413.090(2)
(establishing
a
fifteen
year
limitation
period
for
written
contracts).
Kentucky
contractual
courts
have
limitations
consistently
periods
in
upheld
insurance
one
year
policies
as
reasonable. See Edmonson v. Penn. Nat’l Mut. Cas. Ins. Co., 781
S.W.2d 753 (Ky. 1989) (“[T]here is no question in this case as
to the validity of the limitation provided in the conditions of
the policy.”); Webb, 577 S.W.2d 17 (upholding as reasonable a
one year contractual limitation in a homeowner’s policy); Hale
v. Blue Cross & Blue Shield of Ky., Inc., 862 S.W.2d 905, 907
(Ky. Ct. App. 1993) (“[O]ne year from the date of filing a
medical claim is not unreasonable.”); see also Elkins v. Ky.
Farm Bureau Mut. Ins. Co., 844 S.W.2d 423, 424 (Ky. Ct. App.
1992)
(“[T]he
rights
under
a
fire
6
insurance
policy
can
be
ascertained on the date of the loss or soon thereafter, and one
year is not an unreasonably short time to require that a suit be
commenced.”). Plaintiffs contend that the one-year limitation is
not reasonable because they did not become aware that the damage
to the personal property had not been repaired until after the
one-year limitation period had passed. See [D.E. 28-2 at 4] (“As
we
began
moving
boxes
of
personal
property
into
the
newly
repaired residence, it became obvious that the vast majority of
the items were irreparably damaged due to the retained smell of
smoke.”).
Plaintiffs’
assertions
that
they
could
not
discover
the
damage to the personal property is undercut by the fact that
they
were
given
opportunities
to
inspect
the
property,
both
personally and by their agent, Mr. Howarth, well within the oneyear limitations period. [D.E. 34-6 at 10; 35-2 at 1; 34-8 at
3].
Both
Christian
Barjuca,
[D.E.
34-6
at
10],
and
Vicki
Barjuca, [D.E. 35-2 at 1], gave deposition testimony that they
went
to
property
the
Servpro
to
determine
warehouse
what
to
items
inventory
of
and
personal
inspect
property
the
were
damaged. Christian Barjuca further testified to the following:
Q: Mr. Barjuca, I’ve showed you three – three copies
that look like similar formats. . . . Now, I think you
were telling – about to tell me that Mr. Howarth and
his company prepared these?
A: Yes.
7
. . .
Q: So did they
inventory –
actually
go
the
storage
place
and
A: Yeah, they – they did both. They – they came to the
house, and they went to the storage place at Servpro.
[D.E. 34-8 at 2-3]. Thus, Plaintiffs and Plaintiffs’ agent, Mr.
Howarth,
damage
were
within
allowed
the
to
inspect
one-year
the
personal
contractual
property
limitations
for
period.
Plaintiffs cannot now assert that they had no opportunity to
discover the damage to the property when the evidence shows they
inspected
the
personal
property
within
the
contractual
limitations period.
Furthermore,
Plaintiffs
some
believe
they
of
the
should
personal
be
property
compensated
for
was
which
not
even
stored in the Servpro warehouse and remained in their control
throughout
the
dispute.
Christian
Barjuca
stated
during
his
deposition:
A: Yes. One of his employees named Aaron came to the
house specifically for the purpose of inventorying
everything that was affected by the fire.
Q: Okay.
A: A lot of this stuff was up in the attic. These were
the things that were not taken to Servpro.
[D.E.
34-8
at
2].
Plaintiffs
cannot
claim
they
could
not
discover the damage when the property remained in their home.
Additionally,
Farm
to
a
Plaintiffs
review
reveals
of
the
that
8
correspondence
the
dispute
from
over
State
personal
property arose within one-year of the date of loss. On December
9, 2009, Jeffrey Lykins, Plaintiffs’ State Farm agent, sent a
letter to Plaintiffs asking to inspect the additional items of
personal
property
claimed
and
informing
Plaintiffs
that
“[c]ertain items that you have claimed for replacement have been
cleaned or restored and we need to determine if the repairs were
successful or if additional cleaning is warranted or if the item
needs to be replaced.” [D.E. 18-8]. This letter indicates that
as early as December 2009 State Farm showed hesitance to fully
replace personal property it believed had been restored.
On April 23, 2010, Lykins wrote to Plaintiffs enclosing
payment
for
the
cleaning
and
restoration
of
clothing
and
additional personal property, and that “[i]n this situation all
information
indicates
that
the
clothing
has
been
repaired.”
[D.E. 18-9]. This letter makes clear that State Farm believed
the
clothing,
for
which
Plaintiffs
claim
they
should
be
compensated, was repaired in April 2010. [D.E. 34-7 at 7].
Furthermore,
in
discussing
the
December
9,
2009
letter,
Plaintiff Christian Barjuca testified to the following:
Q: Now as you worked through the personal property
claim, were there some items, whether it be clothing
or furniture that you discussed – all right, does this
– was it adequately cleaned, or does it still smell
like smoke, or does it need to be replaced?
A: Yeah,
lines.
we
had
a
lot
of
9
discussions
along
those
[D.E. 34-7 at 8]. Thus, Plaintiffs knew, at the latest, in April
2010, almost four months before the expiration of the one-year
contractual limitations period, that State Farm was contending
they
had
adequately
repaired
much
of
the
personal
property.
Plaintiffs had almost four months to inspect the property and
ensure
that
it
had
been
adequately
repaired
before
the
expiration of the limitations period.
Furthermore, according to Plaintiff Vicki Barjuca, Lykins
warned
Plaintiffs
that
the
contractual
limitation
period
for
bringing suit was close to expiring and all of the letters sent
to Plaintiffs included notice of the one-year limitation period.
[D.E. 35-2 at 1-2] (“I remember Jeff saying that we were getting
near the expiration of, you know, trying to make claims, like we
had to say if things were broken or not. . . . And we really
couldn’t determine that until we were back in the house again
after eighteen months.”); [D.E. 18-6 at 3; 18-7 at 3; 18-8 at 3;
18-9; 18-10 at 4; 34-45 at 3; 34-64 at 3; 34-65 at 3].
Based upon a review of the facts, Plaintiffs were aware
State Farm believed they had repaired the property within the
one-year contractual limitations period. Plaintiffs had access
to the personal property, as is evidenced by their deposition
testimony, and could have asked to inspect the repaired property
before
the
expiration
of
the
one-year
limitations
period.
Additionally, through correspondence with State Farm, Plaintiffs
10
were
continually
reminded
of
the
one-year
contractual
limitations period.
While the Court recognizes that this creates a situation
where future insureds may be forced to file a protective suit,
based on the possibility the insurer will not agree with the
insured’s assessment of damage, the Court is bound by Kentucky
precedent and how the Court believes the highest Kentucky court
would rule. See In re Dow Corning Corp., 419 F.3d 543, 549 (6th
Cir.
2005)
(“In
applying
state
law,
we
anticipate
how
the
relevant state’s highest court would rule in the case and are
bound by controlling decisions of that court.”). Kentucky courts
have
consistently
upheld
a
one-year
contractual
limitations
period, and have even found that Kentucky has a policy favoring
the shortening of the limitations period. Webb, 577 S.W.2d at 18
(“[W]e
are
allows
an
indicates
of
the
insurer
that
the
opinion
to
limit
public
that
an
a
statutory
action
policy
of
provision
against
Kentucky
it
which
certainly
favors
such
limitations.”). The Plaintiffs were given adequate opportunity
within the year from the date of loss to determine what personal
property items were damaged and whether or not those items had
been properly repaired. Thus, the Court finds that the one-year
limitation is reasonable and the Plaintiffs’ claim is barred by
the expiration of the limitations period.
11
Plaintiffs ask the Court to rely on Riggs v. State Farm
Automobile Insurance Company, a recent decision handed down by
the
Kentucky
3778143
(Ky.
Court
Ct.
of
App.
Appeals.
July
19,
No.
2012-CA-354-MR,
2013).
The
Court
2013
notes,
WL
and
Defendant is quick to point out, [D.E. 31 at 2], that this is
not a final opinion, and, therefore, is not binding precedent on
this Court.
The Court does not find Riggs to be persuasive. The Riggs
court applied the fifteen year statute of limitations, in part,
because
the
contractual
limitation
clause
“might
very
well
require the insured . . . to bring suit against his insurer
before
discovering
whether
the
tortfeasor
is
uninsured
or
underinsured.” Riggs, 2013 WL 3778143, at *4. Plaintiffs contend
that the one-year limitation is unreasonable because they had
two years to sue the tortfeasor alleged to have manufactured the
faulty gas line and only one year to sue State Farm. Thus, under
Riggs, Plaintiffs contend, the contractual limitation period is
unreasonable because it forced them to sue State Farm before the
alleged tortfeasor. [D.E. 28 at 5].
The Riggs decision is not applicable to the case at bar.
The
Riggs
decision
involves
uninsured/underinsured
motorist
coverage, not a homeowner’s policy. Unlike a homeowner’s policy,
the
determination
of
whether
a
tortfeasor
is
uninsured
or
underinsured, through a suit governed by a two-year statute of
12
limitations, will impact the insurer’s liability in a separate
suit, governed by a one-year contractual limitations period. In
the
case
at
bar,
whether
or
not
the
alleged
tortfeasor
manufactured a faulty gas line has no bearing on State Farm’s
liability under the homeowner’s policy issued to the Barjucas.
Thus, the Court does not find the reasoning of Riggs applicable
to the case at bar, and the one-year contractual limitations
period is reasonable.
Plaintiffs next contend that even if the contractual period
is reasonable, it should not be enforced due to the doctrines of
impossibility
Impossibility
of
of
performance
performance
and
will
equitable
excuse
a
estoppel.
party
performance of a contract
[w]here from the nature of the contract and the
surrounding
circumstances
the
parties
from
the
beginning must have known that it could not be
fulfilled unless when the time for fulfillment
arrived, some particular thing or condition of things
. . . exist(s) so that they must be deemed, when
entering into the contract to have contemplated such .
. . existence as the foundation of what was to be
done; in the absence of any express or implied
warranty that such thing or condition of things shall
exist the contract is to be construed as subject to an
implied condition that the parties shall be excused in
case, before breach, performance becomes impossible .
. . without default of either of the parties. . . . An
event which substantially frustrates the objects
contemplated by the parties when they made the
contract excuses nonperformance of the contract. In
such a case it is sometimes said that the foundation
of the contract is gone.
13
from
Horn v. Ranier, 560 S.W.2d 233, 235 (Ky. Ct. App. 1977) (quoting
Straus v. Kazemekas, 124 A. 234, 238 (Conn. 1924)). Plaintiffs
contend
that
it
was
impossible
to
comply
with
the
one-year
contractual limitations period because Plaintiffs “did not have
access to the bulk of their personal property until months after
the one-year contractual period” ended and that the “situation
was caused by State Farm’s failure to negotiate in good faith
with Barjuca on the structural damage claim.” [D.E. 26 at 6].
Defendant counters by arguing that Plaintiffs elected to keep
their
personal
inspect
the
property
property
in
and
storage,
being
despite
informed
of
being
the
able
to
contractual
limitations period in multiple letters. [D.E. 31 at 5].
Plaintiffs’ argument that filing suit within the one-year
contractual
limitation
period
was
impossible
is
unavailing.
Plaintiffs’ argument is founded upon the fact that they claimed
they did not discover many of the damaged items until they moved
back into the home and unpacked, more than a year after the loss
was incurred. However, Plaintiffs were allowed to inspect the
property while it was located in the Servpro warehouse. [D.E.
34-6
at
10;
35-2
at
1].
Additionally,
in
discussing
forms
prepared by Mr. Howarth, Plaintiffs’ private insurance adjuster,
Mr.
Barjuca
Howarth’s
storage
testified
company
place
at
that
“came
to
Servpro.”
in
the
inventorying
house,
[D.E.
14
and
34-8
at
the
they
3].
property
Mr.
went
the
to
Thus,
both
Plaintiffs and their agent were allowed to inspect the personal
property while it was being stored in the Servpro warehouse.
Mr.
Barjuca
testified
that
Plaintiffs
were
allowed
to
inspect the items stored at Servpro within a week. [D.E. 34-6 at
10]. Three personal property inventory forms prepared by Mr.
Howarth’s company, are dated, respectively, March 1, 2010, March
8,
2010,
Therefore,
and
March
both
9,
2010.
Plaintiffs
and
[D.E.
their
34-55;
agent
34-59;
were
34-60].
given
an
opportunity to inspect the damaged personal property well within
the one-year contractual limitation period. Furthermore, some of
the items Plaintiffs claim they should be compensated for were
not even put into storage by Servpro. [D.E. 34-8 at 2] (“A lot
of this stuff was up in the attic. These were the things that
were not taken to Servpro.”). Therefore, Plaintiffs were given
adequate opportunity to inspect the property for damage, and
their argument that it was impossible to comply with the oneyear limitations period must fail.
Plaintiffs’ impossibility of performance argument seems to
rely on the fact that it was cumbersome to search through all of
the boxes while in storage. See [D.E. 35-2 at 2] (“Because you
have to understand, from a 5,000 square foot house in a box to
categorize, I mean it’s not like they just set it up nicely so
you could look at it. I mean it’s, you know, hundreds of boxes.
Digging
through,
you
know.”).
15
There
is
“a
well-established
principle
of
law
that
one
party
to
a
contract
may
demand
performance although it has become more difficult or onerous to
the other party and probably worthless to the one demanding it.”
Swiss
Oil
(citations
Corp.
v.
Riggsby,
67
S.W.2d
omitted).
Although
the
30,
Court
33
(Ky.
recognizes
1933)
that
the
stored personal property may have been difficult to inspect,
that is simply not enough for the Court to find that Plaintiffs
could
not
comply
with
the
one-year
contractual
limitations
period.
Plaintiffs
estopped
from
third
argument,
relying
on
the
that
State
contract
Farm
between
is
equitably
the
parties,
similarly fails. [D.E. 26 at 8]. As grounds for the application
of
equitable
estoppel,
Plaintiffs
assert
that
“State
Farm’s
conduct in delaying in [sic] the negotiations on the structural
damage claim led directly to the impossibility of Barjuca in
being able to analyze the existence and extent of damage to
their personal property.” [D.E. 26 at 8].
“In order to prevail on a theory of estoppel, there must be
proof not only of an intent to induce inaction on the party to
be
estopped,
but
also
of
reasonable
reliance
by
the
party
claiming the estoppel.” Gailor v. Alsabi, 990 S.W.2d 597, 604
(Ky.
1999)
(citing
Adams
v.
Ison,
249
S.W.2d
791,
793
(Ky.
1952)). Equitable estoppel has been applied to keep insurance
companies from applying the statute of limitations agreed to in
16
the insurance policy. See, e.g., Hitachi Auto. Prods. USA, Inc.
v.
Craig,
estopped
279
an
S.W.3d
employer
123
(Ky.
from
2008)
asserting
(holding
a
that
limitations
equity
defense
because the insurance carrier failed to comply with Kentucky
statute). “Older Kentucky cases hold that insurance settlement
negotiations
do
not
toll
the
limitations
period
or
estop
a
carrier from asserting a limitations defense unless the carrier
makes a false promise to settle the claim or engages in other
misleading
behavior
that
reasonably
induces
a
tardy
filing.”
Hitachi Auto. Prods., 279 S.W.3d at 126 (citations omitted).
Kentucky courts have “emphasized . . . that the real inquiry
should
be
whether
the
party
against
whom
the
statute
was
asserted was justified in relying upon the representations and
activities of the insurance adjuster in delaying filing suit
until time had run out.” Carroll Cnty. Mem’l Hosp. v. Yocum, 489
S.W.2d 246, 248 (Ky. 1972) (citing Miller v. Thacker, 481 S.W.2d
19 (Ky. 1972)) (finding estoppel appropriate where the insurer
agreed to waive the statute of limitations for a reasonable
time); see also Miller v. Thacker, 481 S.W.2d 19 (Ky. 1972)
(holding that insurer was estopped from asserting a limitations
defense
where
the
insurer
made
several
misrepresentations
to
plaintiff); Cuppy v. Gen. Accident Fire & Life Assurance Corp.,
378 S.W.2d 629 (Ky. 1964) (refusing to apply equitable estoppel
when
the
insurance
agent
stated
17
“they
would
take
care
of
everything”);
Pospisil
v.
Miller,
343
S.W.2d
392
(Ky.
1961)
(finding that estoppel did not apply based upon the insurance
agent’s representations that settlement would be reached after
plaintiff
had
recovered);
received
Jackson
v.
all
of
her
Jackson,
313
bills
S.W.2d
and
868
physically
(Ky.
1958)
(holding that estoppel did not apply when the insurance company
told plaintiff it was not necessary to institute a civil action
because
she
had
already
filed
a
claim
with
the
insurance
company).
State Farm is not estopped from asserting the limitations
defense because Plaintiffs have asserted no misleading behavior
by
State
Farm
on
which
it
would
have
been
reasonable
for
Plaintiffs to rely. See Smith v. Allstate Ins. Co., 403 F.3d
401, 407 (6th Cir. 2005) (“There is no evidence that Allstate
lulled
the
Smiths
into
inaction
by
promising
to
pay
their
claim.”). Rather, than attempt to mislead Plaintiffs, the State
Farm agent handling Plaintiffs’ claims, Jeffrey Lykins, warned
Plaintiffs that the one-year limitations period was about to
expire. Vicki Barjuca testified in her deposition that:
[w]e were – I remember Jeff saying that we were
getting near the expiration of, you know, trying to
make any claims, like we had to say if things were
broken or not. . . . So you know, I just remember his
saying, you know, if you – you’d better make sure that
nothing’s broken, nothing’s you know, damaged, that
kind of thing. And we really couldn’t determine that
until we were back in the house again after eighteen
18
months. And really even still then it took – it took
months to go through those boxes.
[D.E.
35-2
at
1-2].
Furthermore,
notice
of
the
one-year
limitations period was included in all transmissions from State
Farm to Plaintiffs that have been filed with this Court. See
[D.E. 18-6 at 3; 18-7 at 3; 18-8 at 3; 18-9; 18-10 at 4; 34-45
at 3; 34-64 at 3; 34-65 at 3]. Equitable estoppel does not apply
because State Farm did not make representations or engage in any
behavior that would have caused Plaintiffs to reasonably allow
the statute of limitations to lapse.
Finally, Plaintiffs argue that there is an ambiguity in the
insurance policy that should keep the Court from applying the
one-year
limitations
period
in
the
policy.
[D.E.
26
at
7].
Plaintiffs claim an ambiguity is created because Coverage B,
personal property, provides that “if property is not repaired or
replaced within two years after the date of loss, we will pay
only the cost to repair or replace less depreciation.” [D.E. 232 at 8]. Thus, according to Plaintiffs, because there is a twoyear
provision
for
repair
or
replacement
in
the
section
governing insurance claims and a one-year limitation period on
bringing suit, an ambiguity exists and the Court should apply
the doctrine of reasonable expectations. Defendant claims that
the limitations period is unambiguous, and an ambiguity cannot
be created by an unrelated policy provision. [D.E. 31 at 6-7].
19
“If
the
favorable
to
contract
the
has
insured
two
constructions,
must
be
adopted.
the
If
one
the
most
contract
language is ambiguous, it must be liberally construed to resolve
any doubts in favor of the insured.” Wolford v. Wolford, 662
S.W.2d 835, 838 (Ky. 1984) (citations omitted). In the event of
an ambiguity, the doctrine of reasonable expectations directs
the Court to interpret the ambiguous terms “in favor of the
insured’s reasonable expectations.” True v. Raines, 99 S.W.3d
439, 443 (Ky. 2003) (quoting Black’s Law Dictionary 1273 (7th
ed. 1999)).
Our
sister
court
has
previously
discussed
an
argument
similar to the one made by Plaintiffs. In Teske v. State Farm
Fire & Casualty Company, the Western District of Kentucky found
that
the
applied
doctrine
to
the
of
same
reasonable
one-year
expectations
contractual
should
limitations
not
be
policy
language because the “provision is not ambiguous and Kentucky
courts routinely uphold these types of provisions.” No. 3:08-cv514-H, 2009 WL 4254583, at *3 (W.D. Ky. Nov. 25, 2009); see also
Hobbs v. Am. Sec. Ins. Co., No. 3:08-cv-471-TBR, 2009 WL 366325,
at *3 (W.D. Ky. Feb. 13, 2009) (finding the same policy language
at issue in this case to be “unambiguous”).
Like our sister court, the Court finds that the one-year
contractual limitations period is unambiguous. The policy, in a
section titled, “Suit Against Us,” and written in bold typeface,
20
states that “[t]he action must be started within one year after
the date of loss or damage.” [D.E. 18-12 at 10]. The Court
cannot
find
any
ambiguity
in
this
section
or
the
language
contained within this section, and, therefore, the reasonable
expectations doctrine does not apply.
Plaintiffs’ Complaint also asserts a claim alleging that
State Farm acted in bad faith when denying their claims. [D.E.
1-1 at 8-9]. The Court previously granted the parties’ construed
joint motion to bifurcate the contract claim from the bad faith
claim and stayed discovery on the bad faith claim. [D.E. 7].
Defendant
asks
this
Court
to
rule
as
a
matter
of
law
that
Plaintiffs cannot set forth a bad faith claim. However, the
Court has stayed discovery on the claim, and, therefore, there
is no evidence with which the Court may make this determination.
The Court also cannot find that the bad faith claim must
fail due to the breach of contract claim being time-barred. The
reasoning for this finding has been previously set out by this
Court.
Here . . . there is an insurance policy and there has
been no finding that Allstate was not obligated to pay
the [plaintiffs’] claim under the express provisions
of the policy. A finding that the claim is now time
barred does not preclude the [plaintiffs] from arguing
that Allstate indeed 1) had an obligation to pay the
claims under the terms of the policy; 2) denied the
claim without a reasonable basis; and 3) either knew
there was no reasonable basis for denying the claim or
acted with reckless disregard for whether such a basis
existed.
21
Tennant v. Allstate Ins. Co., No. 04-cv-54-, 2006 WL 319046, at
*8 (E.D. Ky. Feb. 10, 2006) (citations omitted). Exactly like in
Tennant, the Court has only found that the Plaintiffs’ breach of
contract
claim
is
procedurally
barred.
There
has
been
no
determination that State Farm did not have an obligation to pay
the claims under the policy. Thus, Plaintiffs may still be able
to succeed on their breach of contract claim.
Additionally, the Court notes that the breach of contract
claim does not accrue at the same time as the bad faith claim;
therefore, the Court cannot find that the bad faith claim is
time barred. “[A] claim cannot accrue until the last even[t]
necessary to create the cause of action occurs. Obviously, with
a
bad
faith
claim
such
as
the
[plaintiffs’]
in
which
the
allegation is that the insurance company wrongfully denied an
insured’s
claim,
the
claim
cannot
accrue
until
the
denial.”
Tennant, 2006 WL 319046, at *3 (citations omitted). Kentucky
statute provides that:
[n]o 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.
KRS § 304.14-370. Thus, under Kentucky statute, and because a
bad faith claim alleging wrongful denial cannot accrue until the
alleged
wrongful
denial,
Plaintiffs
22
have
one
year
from
the
denial of the claim in which to file their suit. Based upon the
discovery provided to the Court on the breach of contract claim,
the Court cannot determine when the claim was denied. Thus,
Plaintiffs may maintain their bad faith claim at this time.
IV. Conclusion
Accordingly, for the foregoing reasons, IT IS ORDERED:
(1)
that Defendant’s Motion for Summary Judgment [D.E. 18]
be, and the same hereby is,
GRANTED
IN PART, in so far as
Plaintiffs’ claim for breach of contract must be dismissed, and
DENIED IN PART, in so far as Plaintiffs’ claim of bad faith is
not dismissed;
(2)
that Plaintiffs’ breach of contract claim be, and the
same hereby is, DISMISSED WITH PREJUDICE;
(3)
that Defendant’s Motions in Limine [D.E. 22] be, and
the same hereby are, DENIED AS MOOT.
This the 17th day of December, 2013.
23
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