Myers et al v. Agrilogic Insurance Services, LLC et al
Filing
10
MEMORANDUM OPINION AND ORDER: Dft's 4 Motion to Dismiss, construed in part as a Motion for Summary Judgment is GRANTED. Signed by Judge Joseph M. Hood on March 30, 2015. (AWD) cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
DARREL L. MYERS, et al.,
)
)
Plaintiffs,
)
)
v.
)
)
AGRILOGIC INSURANCE SERVICES, )
LLC, et al.
)
)
Defendants.
)
)
)
Civil Case No.
14-cv-227-JMH
MEMORANDUM OPINION AND
ORDER
***
This matter is before the Court upon the Motion to Dismiss
[DE 4] for failure to state a claim of Defendants Agrilogic
Insurance Services, LLC (“Agrilogic”), and Occidental Fire and
Casualty
Insurance
Company
of
North
Carolina
(“Occidental”).
Plaintiffs have filed a Response [DE 5] stating their objections
to the Motion, and Defendants have filed a Reply [DE 9] in
further
support
of
their
Motion.
This
Motion
is
ripe
for
decision and, for the reasons stated below, shall be granted.
I.
This is a claim for breach of contract and violation of the
Kentucky Unfair Claims Settlement Practices Act (UCSPA) arising
from
crop
insurance
policies
issued
by
AgriLogic,
the
crop
insurance division of Occidental, to the Plaintiffs, insuring
against
certain
enumerated
perils
to
Plaintiffs’
corn
and
tobacco crops located in Nicholas County, Fleming County, and
Fayette County, Kentucky. The relevant policy documents comprise
six
(6)
crop
insurance
“Policies”).
policies
Plaintiffs’
at
tobacco
issue
claims
(collectively,
arising
under
the
the
Policies were paid prior to the filing of the Complaint. As
such, the only unpaid claims at issue under the Policies are
Plaintiffs’ claims for alleged damage to their corn crops.
Each of the Policies contains a provision requiring that
any claims arising thereunder must be brought within twelve (12)
months of the occurrence causing the loss or damage. According
to
the
support
signed
of
loss
documentation
Plaintiffs’
underlying
submitted
corn
to
AgriLogic
claims,
in
Plaintiffs
claimed to have suffered wind damage to their corn crops on July
25, 2012.
its
Agrilogic investigated their claim, first, through
independent
adjuster,
Mike
McNew,
and,
after
discovering
that he had improperly adjusted Plaintiffs’ and other’s claims
in
the
area,
through
additional
inquiries
concerning
local
weather and aerial surveys of the subject crops. Plaintiffs’
claim was denied on May 9, 2013.
commenced until May 7, 2014.
2
This action, however, was not
II.
To
survive
a
motion
to
dismiss,
a
plaintiff
must
demonstrate “a claim to relief that is plausible on its face.”
Bell
Atl.
Corp.
v.
Twombly,
550
U.S.
544,
555
(2007).
A
plaintiff’s allegations must be sufficient to raise his or her
claims
above
a
speculative
level.
Id.
Neither
"[t]hreadbare
recitals of the elements of a cause of action, supported by mere
conclusory statements" nor "the mere possibility of misconduct"
is sufficient. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). This
is no less true when a plaintiff is proceeding pro se. See
Grinter v. Knight, 532 F.3d 567, 577 (6th Cir. 2008) (citing
Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th
Cir. 1988)).
In considering a motion to dismiss, the court may rely on
documents attached to or referred to in a complaint without
converting the motion into a motion for summary judgment, as
documents
attached
to
pleadings
are
considered
part
of
the
pleading itself. See Nieman v. NLO, Inc., 108 F.3d 1546, 1554
(6th Cir. 1997); Weiner v. Klais & Co., 108 F.3d 86, 89 (6th
Cir. 1997); see also Fed. R. Civ. P. 10(c).
In this instance,
Plaintiffs’ Complaint references the insurance policies written
by Agrilogic and under which they seek relief, and the Court may
consider them without converting the motion to dismiss into a
motion for summary judgment.
3
However, in part, Defendants have filed a Motion to Dismiss
for Failure to State a Claim that presents matters outside the
pleadings for the Court's consideration. In such situations, the
Federal Rules of Civil Procedure require the motion to dismiss
to be construed as a motion for summary judgment. Fed. R. Civ.
P.
12(d).
governing
Accordingly,
summary
the
judgment
Court
in
will
look
evaluating
to
those
the
rules
aspects
of
Defendants’ Motion. Fed. R. Civ. P. 56(a).
Summary judgment is appropriate when 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). If there is
a dispute over facts that might affect the outcome of the case
under
governing
law,
then
entry
of
summary
judgment
is
precluded. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248,
(1986). The moving party has the ultimate burden of persuading
the court that there are no disputed material facts and that he
is entitled to judgment as a matter of law. Id. Once a party
files a properly supported motion for summary judgment by either
affirmatively negating an essential element of the non-moving
party's
claim
or
establishing
an
affirmative
defense,
“the
adverse party must set forth specific facts showing that there
is a genuine issue for trial.” Id. at 250. “The mere existence
of
a
scintilla
of
evidence
in
support
of
the
[non-moving
party's] position will be insufficient; there must be evidence
4
on which the jury could reasonably find for the [non-moving
party].” Id. at 252.
III.
The
first
question
before
this
Court
is
whether,
as
a
matter of law, the contractual limitations clause contained in
the subject insurance policy is enforceable and whether it bars
Plaintiffs' claims for breach of contract and violation of the
Kentucky Unfair Claims Settlement Practices Act in this matter.
On the undisputed facts and in light of the applicable law, the
Court
concludes
that
the
one
year
limitations
clause
is
enforceable with respect to the claims of breach of contract and
that Plaintiff's claim for breach of contract is barred by the
application of the limitations clause and the passage of time as
set forth below.
As explained below, the Court need not reach
the issue of whether it would bar the claim for violation of the
UCSPA, as that claim fails as a matter of law on other grounds.
Substantive Kentucky law applies in this diversity case.
Hanover Ins. Co. v. Am. Eng'g Co., 33 F.3d 727, 730 (6th Cir.
1994) (citing Miller's Bottled Gas, Inc. v. Borg–Warner Corp.,
955 F.2d 1043, 1049 (6th Cir.1992); Nat Harrison Assoc., Inc. v.
Louisville Gas & Elec. Co., 512 F.2d 511, 513 (6th Cir.1975)).
Under Kentucky law, the “the construction of insurance contract
provisions
disputed
comprise
facts
are
questions
of
involved.”
law
Id.
5
for
(citing
the
court,
Perry's
unless
Adm'x
v.
Inter–Southern Life Ins. Co., 71 S.W.2d 431, 433 (Ky. 1934)).
Further, the terms and conditions of a contract of insurance
control
the
contractual
relationship
between
the
insurer
and
insured, absent contravention of public policy or statute. See
Meyers v. Kentucky Med. Ins. Co., 982 S.W.2d 203, 209–10 (Ky.
Ct. App. 1997) (quoting Cheek v. Commonwealth Life Ins. Co., 126
S.W.3d 1084, 1089 (1939)).
In this instance, no one disputes that the parties entered
into a contract containing a one-year limitation on actions,
measured from the time of loss. Further, on the facts before it,
the Court concludes that the one-year limitation term in the
contract is enforceable. See, e.g., KRS 304.14–370 (permitting
insurance
companies
in
Kentucky
to
include
coverage
terms
setting a limitations period of no less than one (1) year);
Smith v. Allstate Ins. Co., 403 F.3d 401, 404 (6th Cir. 2005)
(citing Edmondson v. Penn. Nat'l Mut. Cas. Ins. Co., 781 S.W.2d
753, 756 (Ky. 1989); Webb v. Ky. Farm Bureau Ins. Co., 577
S.W.2d
17,
18–19
(Ky.
Ct.
App.
1978))
(“Contract
provisions
limiting the time within which an insured may sue are generally
valid under Kentucky law.”).
Plaintiffs argue that the one month period which remained
after the denial of their claim in which to bring suit hardly
provided them with a reasonable time in which to hire counsel,
investigate,
and
file
suit,
relying
6
on
Dunn
v.
Gordon
Food
Servs., 780 F.Supp.2d 570, 573 (E.D. Ky. 2011). They suggest
that the contractual limitations period should have been tolled
during
Defendants’
investigation,
but
authority to support this conclusion.
they
provide
no
legal
Absent some reason to
suppose that Kentucky courts would embrace such a rule, the
Court rejects this argument.
Next the Court considers the impact of the application of
the one-year limitations period in light of the undisputed facts
--
that
(1)
Plaintiffs’
the
corn
subject
crops
on
claim
arises
July
25,
from
2012,
(2)
wind
the
damage
claim
to
was
denied on May 9, 2013, and (3) they filed suit on May 7, 2014.
This matter was filed out of time if the Court calculates the
limitations period from the date of the wind damage, which is
the only loss averred in this action.
As the contract's own
terms bar the suit before the Court, the Court will dismiss
Plaintiffs' claim for breach of contract and enter judgment in
favor of Defendants.
IV.
The
Court
would
ordinarily
consider
next
whether
the
contract provision bars the claim for violation of the USPCA
straightforwardly or because it would bar any consideration of
Defendants’ obligation to pay.
that
it
need
not
reach
that
However, the Court concludes
issue
as
Plaintiffs’
claim
for
violation of the USPCA fails as a matter of law in light of the
7
undisputed
facts
before
the
Court.
To
state
a
claim
under
Kentucky’s UCSPA, KRS 304.12-2301, 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. 1999) (quoting Wittmer v. Jones, 864 S.W.2d
885, 890 (Ky. 1993)). Only once the plaintiff has made this
initial showing, he or she must “establish three elements to
maintain a bad faith claim, regardless of whether the claim is
brought under common law or statute: (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.” Rawe v. Liberty Mut. Fire Ins. Co., 462 F.3d 521 (6th
Cir. 2006) (citing Wittmer, 864 S.W.2d at 890).
“Evidence of
mere negligence or failure to pay a claim in a timely fashion
will not suffice to support a claim of bad faith. Inadvertence,
sloppiness, or tardiness will not suffice; instead, the element
1
The UCSPA denounces as unfair claims settlement practices, among other
things,
“[r]efusing
to
pay
claims
without
conducting
a
reasonable
investigation based upon all available information” and “not attempting in
good faith to effectuate prompt, fair and equitable settlements of claims in
which liability has become reasonably clear .” KRS 304.12–230(4), (6).
8
of malice or flagrant malfeasance must be shown.”
United Servs.
Auto Assoc. v. Bult, 183 S.W.3d 181, 186 (Ky. Ct. App. 2003).
Defendants
engaged
in
argue
conduct
defendant’s
evil
that
that
motive
rights of others.”
there
was
or
is
no
evidence
“outrageous,
his
reckless
that
because
indifference
they
of
the
to
the
Wittmer, 864 S.W.2d at 890. In support of
their Motion, Defendants have set forth the Affidavit of Travis
Lane, in which they establish that, while the original Loss
Adjustment
signed
Worksheets
by
and
Worksheets
independent
AgriLogic’s
Appraisal
adjuster,
prepared
Mike
and
McNew,
purported to verify losses, Agrilogic learned that McNew had
improperly adjusted a number of claims in the area, including
Plaintiffs’
claims.
investigation,
which
Thus,
included
Agrilogic
review
of
engaged
the
in
National
further
Weather
Service’s data which revealed that there were no reports of
heavy winds or hail in the Commonwealth of Kentucky on July 25,
2012,
and
November
aerial
of
2012,
Plaintiffs’ fields.
surveys
of
Plaintiffs’
photographs
from
crops
which
conducted
appear
to
in
show
Agrilogic also requested that Plaintiffs
provide further information to support their claim of loss, such
as production records, photographs, or other reliable evidence.
There is no record that such additional evidence was provided by
Plaintiffs
having
in
the
considered
materials
the
before
information
9
this
Court.
obtained
Ultimately,
through
its
investigation, Agrilogic concluded that there was no evidence
satisfactory to support Plaintiff’s claim for loss.
In their Response, Plaintiffs do not dispute these elements
of the investigation or even that the Defendants reached their
conclusions as a result of the investigation, stating only that
“the documentation submitted by Defendants do[es] no[t] on its
fac[e] dispute any claims that Plaintiff has asserted.”
Court is not persuaded that this is the case.
The
Even accounting
for the possibility that Defendants got the answer wrong and
Plaintiffs actually did suffer some loss of their corn crop due
to
wind
damage,
Agrilogic
there
reached
its
is
no
evidence
conclusion
as
a
which
suggests
result
of
that
outrageous
actions.
This
Phelps
Appeals
v.
case
differs,
State
found
Farm,
that
for
in
Phelps
example,
which
the
presented
from
that
Sixth
described
Circuit
sufficient
in
Court
of
evidence
of
lowball offers, delay tactics and questionable claims-handling
practices
Phelps
v.
to
meet
State
the
Farm,
threshold
736
F.3d
inquiry
697
(6th
for
a
Cir.
USPCA
claim.
2012).
First,
Phelps demonstrated that State Farm's initial offer of $25,000
not only failed to reasonably account for her pain and suffering
and future wage loss, it was “just barely above the low-end of
both [State Farm's] own evaluation of the claim ($24,620 to
$49,620) and Phelps's documentation of medical and wage loss
10
costs
($22,620.22).”
Id.
at
705.
Second,
Phelps
showed
that
State Farm delayed settlement of the claim for three years. Id.
at 705–06. Specifically, State Farm refused to make an initial
valuation of Phelps's claims until it reviewed medical records
relating to a prior injury but made no effort to obtain these
records for over six months.
Id. State Farm also repeatedly
refused to disclose its insured's policy limits, switched claims
adjusters four times without explanation, refused to increase
its offer without documentation of additional damages and failed
to include facts in the claim file that would support a jury
verdict in Phelps's favor. Id. at 706–07.
There are no such facts in this matter from which the Court
conclude
that
Agrilogic
sought
to
accomplish
anything
more
nefarious than an effort to reach a reasoned decision on the
claim based on facts.
Thus, the Court agrees with Defendants
that,
law,
as
a
matter
of
Plaintiffs
cannot
meet
the
high
evidentiary standard required to support a USPCA claim because
the record, which is undisputed, shows no evidence of an evil
motive or reckless indifference to Plaintiffs’ rights. Instead,
AgriLogic
communicated
Plaintiffs,
engaged
in
regularly
further
–
if
infrequently
investigation
only
–
with
when
the
circumstances warranted further action, and attempted to remedy
what
it
believed
to
be
McNew's
errors.
Simply
engaging
in
further investigation, including examining the allegedly damaged
11
crop
(i.e.,
the
aerial
surveys)
and
requesting
further
documentation, including harvesting or marketing records for the
insured crop, is permitted by the General Provisions of the
Policy of Insurance.
[See Section 3.a.(3) and (4), Agreement to
Insure, DE 4-4 at 7, Page ID#: 48.]
These actions do not
suggest outrageous conduct.
Because
malfeasance
Plaintiffs
sufficient
have
to
failed
satisfy
to
show
Kentucky
evidence
law's
of
threshold
inquiry for bad faith claims, the Court need not consider the
parties' remaining arguments regarding Defendants obligation to
pay.
For
all
of
these
reasons,
Defendants
are
entitled
to
summary judgment on the bad faith claim.
V.
For all of the reasons stated above, summary judgment in
favor of Defendants is appropriate.
Accordingly, IT IS ORDERED
that Defendant’s Motion to Dismiss [DE 4], construed in part as
a Motion for Summary Judgment, is GRANTED.
This the 30th day of March, 2015.
12
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