Demus v. Nationwide Property and Casualty Insurance Company
MEMORANDUM OPINION & ORDER: 1) 16 MOTION for Summary Judgment is GRANTED. 2) Action is DISMISSED w prejudice and STRICKEN from the Court's docket. 3) PTC previously scheduled for 3/9/2016 and trial for 4/12/2016 are CANCELED and SET ASIDE. Signed by Judge Danny C. Reeves on 12/7/2015.(SCD)cc: COR,D,JC
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
NATIONWIDE PROPERTY AND
Civil Action No. 5: 15-112-DCR
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This matter is pending for consideration of Defendant Nationwide Property
and Casualty Insurance Company’s (“Nationwide”) motion for summary judgment.
[Record No. 16] For the reasons outlined below, Nationwide’s motion will be
On December 3, 2013, Plaintiff Barry Demus was involved in an
automobile accident that damaged his 2003 Dodge Ram truck. [Record No. 1-1, p.
8; Record No. 16-1, p. 2] The accident was caused by Gene Relford whose vehicle
was insured by Nationwide.
On December 5, 2013, a Nationwide
representative contacted Demus about the accident. [Record No. 35-10, p. 5]
Eleven days later, Nationwide representative, Bret Grier, recorded the pre-accident
value of the Dodge Ram and Nationwide’s settlement offer in the company’s claim
log. Id. at 4. Nationwide estimated the vehicle’s pre-accident value as $6,347.00,
plus $380.82 in taxes. [Record No. 16-8] The salvage estimate obtained by
Nationwide valued the vehicle at $1,285.41. [Record No. 16-11] According to
Nationwide’s appraisal, repairing the damage from the accident would cost
$3,941.58. [Record No. 16-7] A separate appraisal estimated that the cost of
repairing pre-accident damage to the truck would be $1,819.10. [Record No. 16-6]
Instead of paying $3,941.58 to repair the vehicle, Nationwide offered to salvage it.
[Record No. 35-10, p. 4] Because Demus wanted to retain the vehicle, Nationwide
would pay him the value of his truck pre-accident plus tax and $25.00 for the title
fee less the truck’s salvage value for a total of $5,467.41. Id. Further, Nationwide
explained that it would not issue a settlement check until Demus obtained a salvage
title which required satisfaction of all liens on the vehicle. Id.
Demus told the Nationwide representative that Auto Select of Lexington,
LLC (“Auto Select”) had a lien on the vehicle. Id. On December 16, 2015, the
same day Grier recorded the estimates and settlement offer, Grier attempted to
contact Mona Shalash, Auto Select’s owner, to determine the balance of the lien.
Id. With its motion for summary judgment, Nationwide submitted an e-mail from
Auto Select to Grier dated December 17, 2013, which simply states, “Bret, The 10
day pay off on the Dodge that Barry Demus has a claim on is $2,949.68. Thank
you, Auto Select of Lexington LLC.” [Record No. 16-9] On December 19, 2013,
Grier sent Demus a check via next day mail made payable to “Auto-Select of
Lexington LLC and Barry Demus” for $2,949.68 to pay-off the lien. [Record No.
35-10, p. 3] According to the Complaint, Demus refused to endorse the check to
Auto Select because he believed he owed less on the lien than the amount of the
check. [Record No. 1-1, p. 8]
Demus also claims that he told Nationwide that Shalash was untrustworthy
and that he had paperwork showing that he no longer owed anything on the lien.
Id. However, Demus asserts that Nationwide issued the check without asking to
examine the paperwork. The following day (December 20, 2015), Nationwide sent
another check via next day mail to Auto Select made out exclusively to “Auto
Select of Lexington LLC” for $2,949.68. [Record No. 35-10, p. 3; Record No. 359]
On December 31, 2013, Grier contacted Demus to confirm he was still
planning to keep the vehicle. [Record No. 35-10, p. 3] In his Complaint, Demus
admits that Auto Select eventually released the lien but failed to do so promptly.
[Record No. 1-1, p. 9] On January 29, 2014, Demus advised Grier he planned to
go to the Kentucky Department of Motor Vehicles the next day to get a salvage
title and would then fax proof of that value to Nationwide. [Record No. 35-10, p.
Demus did obtain the salvage title on January 30, 2014. [Record No. 16-14]
Thereafter, on February 3, 2014, Grier sent Demus a check via next day mail for
$2,517.73, which represented the amount of the original settlement offer, reduced
by the amount Nationwide paid to satisfy Demus’ lien. [Record No. 35-10, p. 3;
Record No. 16-13]
On December 16, 2014, Demus filed this action in the Fayette Circuit
[Record No. 1-1]
In his Complaint, Demus alleges that Nationwide
violated Kentucky’s Unfair Claims Settlement Practices Act (“UCSPA”) through
its actions. Id. at 9-10. Specifically, he contends that Nationwide “did not attempt
in good faith to effectuate a prompt, fair and equitable settlement of Mr. Demus’s
claim.” Id. at 9. The plaintiff also asserts that Nationwide failed to “make a
reasonable investigation before refusing to pay loss amounts to [him].”
According to the Complaint, Nationwide “failed to maintain the effective
procedures and resources to deter and investigate suspected fraudulent insurance
acts . . . or failed to use them despite Mr. Demus’s express warnings about Auto
Select’s baseless assertions.” Id. at 9-10. Finally, Demus claims that Nationwide
violated the UCSPA by engaging “in unfair or deceptive conduct.” Id. at 10.
Demus seeks damages for Nationwide’s underpayment of his claim and prejudgment interest under K.R.S. § 304.12-235. Id. at 9. Specifically, he believes
that he was entitled to the total value of his truck. Id. Therefore, he estimates that
Nationwide owes him $2,950.00 (rounded up from the $2,949.68 that Nationwide
paid Auto Select) plus $1,200.00 (rounded down from the $1,285.41 Nationwide
deducted from his settlement for his vehicle’s salvage value). [Record No. 35-1, p.
5] Demus also alleges over $7,000 in related compensatory damages. Id. Further,
Demus seeks costs, “including a reasonable attorneys [sic] fee” and $114,061.14 in
punitive damages. [Record No. 1-1, p. 11; Record No. 35-1, p. 6]
On April 28, 2015, Nationwide removed the action to this Court based on
diversity jurisdiction. [Record No. 1] Thereafter, Nationwide filed this motion for
summary judgment. [Record No. 16] After much delay, the motion has been fully
To obtain summary judgment, a movant must demonstrate that no genuine
issue of material fact exists and it is entitled to judgment as a matter of law. Fed.
R. Civ. P. 56(a). See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Chao
v. Hall Holding Co., 285 F.3d 415, 424 (6th Cir. 2002). “A genuine issue of
material fact exists when there is ‘sufficient evidence favoring the nonmoving
party for a jury to return a verdict for that party.’” Chao, 285 F.3d at 424 (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52 (1986)). See Harrison v.
Ash, 539 F.3d 510, 516 (6th Cir. 2008). In deciding whether summary judgment is
appropriate, the Court must view all the facts and draw all inferences from the
evidence in a light most favorable to the non-moving party. Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Kentucky’s Unfair Claims Settlement Practices Act (“UCSPA”)
Nationwide argues that summary judgment is appropriate on all claims
under Kentucky’s Unfair Claims Settlement Practices Act because it handled the
plaintiff’s insurance claim reasonably. [Record No. 16-1, p. 14] At the very least,
Nationwide asserts that its conduct was not sufficiently egregious to meet the high
standard for bad faith claims under the UCSPA. Id.
The UCSPA generally prohibits unfair competition and “unfair or deceptive
act[s] or practice[s] in the business of insurance.” K.R.S. § 304.12-010. Kentucky
Revised Statutes § 304.12-230 prohibits seventeen specific unfair practices.
Demus’ complaint appears to accuse Nationwide of violating the following
(3) Failing to adopt and implement reasonable standards for the
prompt investigation of claims arising under insurance policies;
(4) Refusing to pay claims without conducting a reasonable
investigation based upon all available information;
(6) Not attempting in good faith to effectuate prompt, fair and
equitable settlements of claims in which liability has become
(7) Compelling insureds to institute litigation to recover amounts due
under an insurance policy by offering substantially less than the
amounts ultimately recovered in actions brought by such insureds;
K.R.S. § 304.12-230.
The Supreme Court of Kentucky has determined that claimants may
maintain a private right of action against an insurer for violation of the UCSPA.
State Farm Mut. Auto. Ins. Co. v. Reeder, 763 S.W.2d 116, 118 (Ky. 1988). The
Reeder Court also held that the UCSPA should be “liberally construed so as to
effectuate its purpose” of protecting the public from unfair trade practices and
fraud. Id. However, a claimant “must meet a high threshold standard” to maintain
a claim under the UCSPA. Phelps v. State Farm Mut. Auto. Ins. Co., 736 F.3d
697, 703 (6th Cir. 2012). First, the claimant must make an initial showing that the
insurer’s conduct was sufficiently “outrageous” to warrant an award of punitive
damages. United Servs. Auto. Ass’n v. Bult, 183 S.W.3d 181, 186 (Ky. App.
In other words, the insurer’s conduct must amount to “intentional
misconduct” or “reckless disregard” of the claimant’s rights. Id.
“Evidence of mere negligence or failure to pay a claim in [a] timely fashion
will not suffice to support a claim for bad faith. Inadvertence, sloppiness, or
tardiness will not suffice; instead, the element of malice or flagrant malfeasance
must be shown.” Id. After making the initial showing, the claimant must further
meet the following three elements of a bad faith claim:
(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. . . . [A]n
insurer is . . . entitled to challenge a claim and litigate it if the claim is
debatable on the law or the facts.
Wittmer v. Jones, 864 S.W.2d 885, 890 (Ky. 1993) (internal quotation marks and
citation omitted). See Phelps, 736 F.3d at 703. When deciding a motion for
summary judgment, “[t]he appropriate inquiry is whether there is sufficient
evidence from which reasonable jurors could conclude that in the investigation,
evaluation, and processing of the claim, the insurer acted unreasonably and either
knew or was conscious of the fact that its conduct was unreasonable.” Farmland
Mut. Ins. Co. v. Johnson, 36 S.W.3d 368, 376 (Ky. 2000).
Before addressing Demus’ individual claims under the UCSPA, the Court
will first address the two issues underlying those claims. First, Demus asserts that
Nationwide acted unreasonably in its valuation of his claim. In particular, Demus
states in his response that, “Nationwide improperly ‘totaled’ his vehicle and
charged Mr. Demus for ‘retaining’ it.” [Record No. 35, p. 9] Second, Demus
argues that Nationwide’s payment of $2,949.68 to Auto Select constituted
unreasonable conduct. Id. at 3.
Kentucky law provides that the owner of a motor vehicle shall obtain a
salvage title for his vehicle if:
[the] vehicle has been wrecked, destroyed, or damaged, to the extent
that the total estimated or actual cost of parts and labor to rebuild or
reconstruct the vehicle to its preaccident condition and for legal
operation on the roads or highways, not including the cost of parts and
labor to reinstall a deployed airbag system, exceeds seventy-five
percent (75%) of the retail value of the vehicle, as set forth in a
current edition of the National Automobile Dealer’s Association price
K.R.S. § 186A.520(1)(a). If damage to a vehicle meets or exceeds seventy-five
percent of its value and the owner retains the vehicle, the insurer is statutorily
required to withhold payment on a damage claim until it receives proof that the
owner has obtained a salvage title. K.R.S. § 186A.530(7)(b).
Nationwide asserts that the total damage to the vehicle exceeded ninety
percent of its retail value, statutorily requiring Demus to obtain a salvage title.
[Record No. 16-1, p. 7] Nationwide reached that figure by adding $3,941.58, the
cost to repair the damage resulting from the subject accident, and $1,819.10, the
cost to repair the pre-accident damage to the vehicle. Id. at 6. Nationwide then
divided that figure by the truck’s appraised pre-accident value of $6,347.00. Id. at
Conversely, Demus asserts that the proper calculus per the statute is the cost
to repair the vehicle to its pre-accident condition divided by the vehicle’s total
value. [Record No. 35, p. 9] Applying that formula, the damage to the vehicle
($3,941.58) only represented sixty-two percent of the vehicle’s total value
($6,347.00). Id. For support, Demus observes that the claims log contains the
VALUATION.” [Record No. 35-10, p. 4] The statute defining salvage does
specify that the calculation should be based on the cost of restoring the vehicle to
its “preaccident condition,” not “perfect condition.” See K.R.S. § 186A.520(1)(a).
Additionally, the appraisal determining the truck’s pre-accident retail value
specifically accounted for the pre-accident damage. [Record No. 16-8, p. 8]
Nevertheless, the statute only provides that a salvage title must be obtained
for a vehicle meeting those specifications. See K.R.S. § 186A.520(1). Demus has
not provided the Court with any evidence that a motor vehicle that falls below the
seventy-five percent threshold is ineligible for a salvage title.
Nationwide’s offer to salvage the vehicle was not unreasonable, especially where
the damage to the vehicle was still a large percentage of its total value, if not
Additionally, Nationwide’s offer to pay Demus the pre-accident value of his
vehicle less its salvage value cannot be fairly characterized as malicious or
outrageous, especially in light of the alternatives. The regulations that implement
the UCSPA state,
The measure of damages in a third-party motor vehicle loss shall be
the difference between the fair market value of the motor vehicle
immediately before and after the loss, proportioned by the third party's
contributory negligence, if any. Repair estimates or appraisers’
reports may be used to indicate the difference in fair market value.
806 Ky. Admin. Regs. 12:095, Section 7 (d)(2). Nationwide could have easily
complied with the regulations by offering Demus $3,941.58, the cost to repair the
vehicle, instead of $5,467.41. Demus now contends that he would have preferred
the $3,941.58 because he received less than that amount after Nationwide paid
Auto Select. [Record No. 35, p. 10] Further, Demus argues that obtaining a
salvage title left him with a vehicle that “cannot be registered to operate on the
highways.” [Record No. 35, p. 10]
The fact that the pay-off to Auto Select reduced Demus’ total settlement
does not demonstrate that Nationwide engaged in intentional misconduct or that
the company recklessly disregarded his rights. Nationwide gained nothing by
paying part of the original settlement offer to Auto Select instead of Demus. There
is also no evidence that Nationwide was even aware of the amount owed to Auto
Select prior to making its initial offer to Demus. Instead, the evidence suggests
that Nationwide premised its initial offer on giving Demus the maximum value for
his severely-damaged vehicle.
Further, Demus’ statement that his vehicle “cannot be registered to operate
on the highways” is incorrect.
K.R.S. § 186A.530(2) explains the procedure
whereby an owner with a salvage title may obtain a new title after the vehicle is
repaired. Demus provided proof that he did in fact repair the vehicle and obtain a
[Record No. 35-4]
Additionally, he now seeks damages from
Nationwide for the cost of re-titling the vehicle. [Record No. 35-1, p. 5; Record
No. 35-3, pp. 9-11]
In short, even after drawing all inferences in Demus’ favor, the evidence
presented here does not support the plaintiff’s contention that Nationwide’s initial
offer was unreasonable. Even if the offer did not fully compensate Demus for the
damages he alleges, he has not pointed to evidence demonstrating that
Nationwide’s conduct was outrageous. The Supreme Court of Kentucky has held
that the UCSPA does not necessarily require that the insurer’s proposed settlement
“always provide wholly accurate or complete compensation for an injury. Instead,
the statute only requires that an insurer make a good faith attempt to settle any
claim, for which liability is beyond dispute, for a reasonable amount.” Coomer v.
Phelps, 172 S.W.3d 389, 395 (Ky. 2005). In this case, Nationwide made an offer
in good faith and for a reasonable amount, entitling it to summary judgment on this
Nationwide’s Payment to Auto Select
Demus contends that Nationwide acted unreasonably by paying Auto Select
$2,949.68 for release of the lien.
[Record No. 35, pp. 3-8]
He states that
Nationwide’s records do not support the amount of the check or Nationwide’s
issuance of the check solely to Auto Select. Id. at 3-7. Demus also finds fault with
Nationwide’s failure to secure the lien’s release in writing. Id. at 7-8. However,
the plaintiff fails to cite any authority that would convert these factual contentions
to legal claims.
Demus appears to base his allegations on K.R.S. § 304.12-230(4), which
obligates insurers to conduct reasonable investigations before refusing to pay
However, in its motion for summary judgment, Nationwide cites to
Wittmer, 864 S.W.2d at 891-92, where the Supreme Court of Kentucky held that,
[a]lthough an insurer is under a duty to promptly investigate and pay
claims where it has no reasonable grounds to resist in good faith,
neither this duty nor any provision of the UCSPA requires the insurer
to assume responsibility to investigate the amount of the claimant’s
loss for the claimant.
Accordingly, Nationwide argues that its “legal responsibility [was] limited to
payment upon proof of loss.” [Record No. 16-1, p. 9] And once Grier received the
e-mail from Auto Select stating the pay-off amount, Nationwide properly made
Demus counters that Wittmer is distinguishable because that case involved
the investigation of a third-party claimant’s damages, not her lien amount. [Record
No. 35, p. 4, fn. 8] While Wittmer did involve a dispute over damages and not a
lien, its reasoning also applies to the circumstances presented here. Subsection
four of K.R.S. § 304.12-230 simply requires insurers “to promptly investigate and
pay claims where it has no reasonable grounds to resist in good faith.” Wittmer at
391-92. Just as that duty does not further obligate the insurer to investigate the
claimant’s loss for him, it also does not mention any legal obligation to investigate
the claimant’s lien on his behalf. The fact that Demus communicated that he owed
less and that Auto Select was untrustworthy did not legally obligate Nationwide to
conduct further investigation.
Even if Nationwide would have investigated and gained access to the
evidence Demus now cites, the precise amount of the lien might still have
remained uncertain. Demus claims that the Auto Select representative who sold
him the car devised a deal whereby he would first pay the down payment and then
the balance of the purchase price over a 24-month period without interest. [Record
No. 35-1, p. 10] From December 2011 to December 2013, Demus claims that he
paid $8,780 in installments plus the $3,900 down payment for a total of
$12,680.00.1 [Record No. 1-1] However, the December 4, 2011, Retail Purchase
Agreement and attached Retail Installment Contract and Security Agreement
signed by Demus and a representative of Auto Select indicate that the total price of
the truck was $15,328.70. [Record No. 16-4] Further, the agreement specifically
provides that interest will accrue at a 24.99 annual percentage rate. Id.
Demus now claims that Auto Select fraudulently manufactured these
documents. [Record No. 35, p. 4, fn. 7] But the fact remains that even a thorough
Demus has also provided a payment schedule showing $12,680.00 in payments from
December 4, 2011 to November 24, 2013. [Record No. 35-3]
investigation might not have established a definitive pay-off amount.2 Certainly,
the UCSPA did not obligate Nationwide to insert itself in such a contentious
dispute over a loan agreement to which it was not a party. Such a requirement
would undoubtedly have delayed Nationwide’s settlement with Demus for much
longer, undermining another purpose of the UCSPA; that is, the prompt settlement
of insurance claims. K.R.S. § 304.12-230(6). Because Nationwide had no duty to
investigate the amount of Auto Select’s lien, its decision not to do so was neither
unreasonable nor outrageous.
Individual UCSPA Claims
Demus claims that Nationwide “engaged in unfair or deceptive conduct in
the business of insurance,” generally invoking the UCSPA. See K.R.S. § 304.12010. Demus also asserts a number of individual UCSPA violations, but the facts
he alleges are immaterial to his legal claims. There is no dispute as to any material
facts, and Nationwide is entitled to summary judgment on each of the plaintiff’s
Demus first accuses Nationwide of “not attempting in good faith to
effectuate a prompt, fair and equitable settlement of his claim,” in violation of
As proof of Auto Select’s “untrustworthiness,” Demus submitted a copy of a plea
agreement filed in a criminal action in this court. [Record No. 35-12] The plea agreement
shows that Auto Select pled guilty in 2012 to structuring transactions to evade reporting
requirements in violation of 31 U.S.C. § 5324. Id. But Demus fails to establish that
Nationwide had any legal duty to discover this information. Even if Nationwide did have
actual knowledge of Auto Select’s criminal history, that information would not have nullified
Demus’ duties under a valid contract.
K.R.S. § 304.12-230(6). Specifically, he argues that “Nationwide had determined
what payment was due on Mr. Demus’s loss no later than December 16, 2013, but
did not make its payment to him until February 3, 2014. This spans a period of 49
days.” [Record No. 35, p. 8 (footnotes omitted)] The regulation implementing
subsection six advises insurers to “offer any payment due within thirty (30)
calendar days of receipt of due proof of loss.” 806 Ky. Admin. Regs. 12:095,
Section 6 (1)(a).
Nevertheless, the Supreme Court of Kentucky held in Wittmer, 864 S.W.2d
at 890, that “technical violations” of the UCSPA are not sufficient to establish a
bad faith claim under the Act. Thus, “mere delay in payment does not amount to
outrageous conduct absent some affirmative act of harassment or deception.”
Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d 437, 452 (Ky. 1997). Therefore, a
nineteen-day delay in payment is insufficient, by itself, to maintain a bad faith
claim under the UCSPA.
Demus has not provided any proof that Nationwide harassed or deceived
him. Rather, all of the evidence indicates that Auto Select and Demus were
primarily responsible for any delay. On December 16, 2013, the day that Demus
claims the thirty-day time limit began to run, Nationwide explained to Demus that
salvaging the vehicle required satisfaction of any liens and proof of a salvage title
prior to final settlement. [Record No. 35-10, p. 4] Nationwide sent Auto Select a
check to satisfy the lien four days later. Id. at 3. Demus delayed that process by at
least a day when he refused to endorse the check that Nationwide initially sent him
for the purpose of paying Auto Select. [Record No. 1-1, p. 8] From December 20
until January 30, Nationwide waited for Demus to obtain a salvage title. [Record
No. 35-10, p. 3] Demus attempts to blame this delay on either Nationwide or Auto
Select. Auto Select has not been made a party to this suit, so whatever part it
might have played in delaying the release of the lien is immaterial.
Nationwide’s responsibility, the statute governing salvage titles clearly indicates
that the owner of the motor vehicle is responsible for obtaining the salvage
certificate in a timely manner. K.R.S. § 186A.530(7)(b) (“The owner shall apply
for a salvage certificate of title within three (3) working days of the agreed
Four days after Demus finally received the salvage title, Nationwide sent a
settlement check via next day mail. [Record No. 35-10, p. 3] Considering all the
evidence, the bulk of the delay cannot be fairly attributed to Nationwide. At the
very least, Nationwide’s conduct in settling the claim did not involve the deception
or harassment necessary for a delay-based UCSPA claim.
Demus also claims that Nationwide violated its duty to conduct a reasonable
investigation under subsection four of K.R.S. § 304.12-230.
discussed above, neither subsection four nor any other provision of the UCSPA
impose on insurers a duty to investigate the amount of claimant’s lien for him.
Demus further accuses Nationwide of violating its duty under subsection
three, requiring it to “adopt and implement reasonable standards for the prompt
investigation of claims arising under insurance policies.” K.R.S. § 304.12-230(3).
Aside from parroting the language of this subsection, Demus offers nothing further
in support of this claim. His attorney states in an affidavit filed with Demus’
response that Nationwide has not yet produced its written policies, guidelines, and
manuals in discovery.3 [Record No. 35-13, p. 3]
But Demus cannot avoid summary judgment by requesting more time for
discovery. Beyond filing an affidavit, the plaintiff is required to explain why he
needs additional discovery, what material facts he hopes to uncover, and why he
has not previously discovered them. Cacevic v. City of Hazel Park, 226 F.3d 483,
488 (6th Cir. 2000).
Demis’ counsel asserts that Nationwide’s policies,
guidelines, and manuals will provide at least “one internal measure” of the
reasonableness of Nationwide’s conduct. [Record No. 35-13, p. 3] However,
Nationwide’s conduct speaks for itself.
Counsel notes that Nationwide agreed to submit those documents after execution of a
protective order, but production of the documents was delayed when this Court denied the
parties’ joint motion for an agreed protective order. [Record No. 35-13] Since the filing of
its reply, Nationwide has notified the Court that it has provided the plaintiff’s counsel with a
copy of its “Material Damage Best Practices Manual.” [Record No. 41] However,
Nationwide’s policies are not necessary for the disposition of the defendant’s motion.
Nothing in the record indicates that Nationwide acted outrageously in its
handling of Demus’ claim.
Neither Demus nor his attorney have identified
anything specific that they hope to obtain through further discovery that might
suggest otherwise. Further, the UCSPA “does not require insurers to adopt written
manuals.” Lenning v. Commercial Union Ins. Co., 260 F.3d 574, 586 (6th Cir.
2001). In Lenning, the Sixth Circuit found that summary judgment was warranted
where the plaintiff failed to identify any procedures that should have been adopted
or demonstrate how the insurer’s investigation was substantively inadequate. Id.
The same result follows from the evidence and pleadings in this case. Nationwide
is entitled to summary judgment regarding Demus’ subsection three claim because
the plaintiff has failed to identify any evidence of unreasonable conduct or
necessary but unadopted procedures.
According to Demus, “Nationwide has forced [him] to assert claims against
it in litigation to recover amounts due to him on the claim.” [Record No. 1-1, p.
10] This language is clearly appropriated from K.R.S. § 304.12-230(7) which
prohibits insurers from, “compelling insureds to institute litigation to recover
amounts due under an insurance policy by offering substantially less than the
amounts ultimately recovered in actions brought by such insureds.” Subsection
seven’s use of the term “insureds” plainly signifies that it only applies to first-party
claimants, not third-party claimants like Demus. See Meador v. Indiana Ins. Co.,
1:05CV-00206-TBR, 2007 WL 1098208 (W.D. Ky. Apr. 12, 2007) (Summary
judgment was appropriate where third-party insurance claimants attempted to
maintain a bad faith claim based on K.R.S. § 304.12-230(7).)
Finally, Demus claims that he is not only entitled to “the remainder of the
total loss on the Truck” but also to prejudgment interest from the date of the
accident “as provided in K.R.S. 304.12-235.” [Record No. 1-1, p. 9] Demus also
seeks attorney’s fees. Id. at 11. Regarding this claim, K.R.S. § 304.12-235
(1) All claims arising under the terms of any contract of insurance
shall be paid to the named insured person or health care provider not
more than thirty (30) days from the date upon which notice and proof
of claim, in the substance and form required by the terms of the
policy, are furnished the insurer.
(2) If an insurer fails to make a good faith attempt to settle a claim
within the time prescribed in subsection (1) of this section, the value
of the final settlement shall bear interest at the rate of twelve percent
(12%) per annum from and after the expiration of the thirty (30) day
(3) If an insurer fails to settle a claim within the time prescribed in
subsection (1) of this section and the delay was without reasonable
foundation, the insured person or health care provider shall be entitled
to be reimbursed for his reasonable attorney's fees incurred. No part of
the fee for representing the claimant in connection with this claim
shall be charged against benefits otherwise due the claimant.
Again, the statute’s use of the word “insured” indicates that the prejudgment
interest and attorney’s fees available under subsections two and three of § 304.12235 do not apply to third-party claimants. The Supreme Court of Kentucky has
held that the statute only applies “to an insurer’s negotiations with its own
policyholder or the policyholder’s health care provider.” Glass, 996 S.W.2d at
Because Demus’ insurance claim was based on Relford’s policy with
Nationwide, not his own, he is not eligible for damages under § 304.12-235.
Demus cites to no other authority that would entitle him to similar damages.
OTHER CLAIMS FOR RELIEF
Right to Refund From Auto Select
Demus also states that he is entitled to damages from Nationwide for
“effectively cutting off [his] offset and refund rights against Auto Select.” [Record
No. 1-1, p. 10] However, he has failed to explain how his dispute with Auto Select
translates into a cognizable legal claim against Nationwide.
Kentucky courts have held that a “non-fraudulent settlement or recovery by
a mortgagor from a third-party tortfeasor bars a subsequent recovery by a
mortgagee against that same tortfeasor for that same act of property damage.”
Grafton v. Shields Mini Markets, Inc., 346 S.W.3d 306, 312 (Ky. App. 2011). See
also State Auto. Mut. Ins. Co. v. Chrysler Credit Corp., 792 S.W.2d 626 (Ky. App.
1990). Once the third-party tortfeasor, Nationwide’s insured in this case, settles
with the mortgagor, Auto Select in this case, the mortgagor “is obligated to hold
the resulting proceeds in trust for the mortgagee. As such, the mortgagee is not
without remedy.” Grafton, 346 S.W.3d at 311. Accordingly, Demus’ remedy for
any refund is against Auto Select itself, not Nationwide.
Demus seeks $114,060.14 from Nationwide for punitive damages. [Record
No. 1-1, p. 11; Record No. 35-1, p. 6] As explained earlier, maintaining a bad faith
claim under the UCSPA requires evidence of misconduct sufficient for an award of
punitive damages. Bult, 183 S.W.3d at 186. But as outlined above, Demus cannot
establish that Nationwide acted outrageously by engaging in “intentional
misconduct” or “recklessly disregarding” his rights. Therefore, Demus is also not
entitled to punitive damages under the facts of this case.
Loss of Use
Demus also claims $7,202.50 in damages for time without the use of his
truck, including loss to income, loss of time, and inconvenience. [Record No. 1-1,
p. 10; Record No. 35-1, p. 5] Regarding this claim, K.R.S. § 304.39-115 states,
Loss of use of a motor vehicle, regardless of the type of use, shall be
recognized as an element of damage in any property damage liability
claim. Such a claim for loss of use of a motor vehicle shall be limited
to reasonable and necessary expenses for the time necessary to repair
or replace the motor vehicle.
In his Answers to Nationwide’s Interrogatories, Demus itemized his
damages for loss of use as follows:
one hour plus 30 miles each weekday for 10 weeks: $1202.50 = (7.25
+ (56¢/mi. x 30 miles)) x 5 days/week x 10 weeks
delivery payments for feed, straw, and other supplies: $500 (est.)
income difference due to disruption to participation in trainer sales in
winter months: $5500 (est.)
[Record No. 35-1, p. 5] The damages Demus lists do not fall within the category
of “reasonable and necessary expenses” covered by § 304.39-115. Demus’ gas
mileage certainly does not qualify as an expense associated with loss of one’s
vehicle. Demus would have to pay for his own gasoline even if he had access to
Further, the statute provides for recovery of “expenses,” not lost income or
The statute’s reasonable and necessary requirement presupposes
reimbursement for some kind of replacement transportation, like bus fees or the
cost of a rental vehicle.
No such expense appears on Demus’ list.
Nationwide’s claims log submitted by Demus into the Court’s record indicates that
Nationwide offered him a rental vehicle but Demus declined.4 Demus may not
claim any “necessary expenses” for loss of use under § 304.39-115 where
Nationwide offered to provide replacement transportation but Demus refused.
Time and Resouces Spent on Settlement
Demus claims that “[h]e spent significant amounts of his own time and
resources seeking prompt, fair and equitable settlement of his claim, including
Nationwide’s agent notes in the entry on December 11, 2013: “Rental Utilized Y or
N: NO.” [Record No. 35-10, p. 4]
trying to get Nationwide to address problems with Auto Select’s assertions and
being required to work with and monitor Auto Select.” [Record No. 1-1, p. 10] As
damages, Demus claims that he is entitled to $29.00 for additional titling fees and
$343.17 for his time, valued by him at $7.25 per hour. [Record No. 35-1, p. 5]
Demus does not cite to any authority that would entitle him to damages for time
spent working on the claim or even for titling fees.
The plaintiff is not entitled to any damages from Nationwide for time spent
negotiating with Auto Select, a non-party. Additionally, Nationwide did include as
part of the settlement $25.00 for the title fees associated with attaining a salvage
title. [Record No. 35-10, p. 4] Further, the receipts Demus submitted to the Court
show he only paid $12.00 on January 30, 2014 for the salvage title. [Record No.
35-3, p. 9] Accordingly, Nationwide is also entitled to summary judgment on this
particular claim for damages.
The plaintiff and his counsel also contend that summary judgment is not
appropriate in this case because of outstanding discovery issues beyond the
production of Nationwide’s written policies, guidelines, and manuals. Demus
observes in his response -- as he did in his motion for a second extension of time to
respond -- that “the discovery period is open for another two months.” [Record
No. 35-2.] However, the fact that discovery remains open does not preclude a
party from filing summary judgment. Rule 56(b) of the Federal Rules of Civil
Procedures allows a party to file a motion for summary judgment “at any time until
30 days after the close of all discovery.” Thus, Nationwide was well within its
rights to file its motion for summary judgment, and the Court is not required to
withhold disposition until the discovery deadline has passed.
To avoid summary judgment based on the need for further discovery, a party
must explain the reason more discovery is needed and what material facts he or she
hopes further discovery will produce. Cacevic, 226 F.3d at 488. In her affidavit,
Demus’ counsel observes that Auto Select has not responded to the subpoena
duces tecum served by the plaintiff while the case was still in state court. [Record
No. 35-13, p. 2] However, counsel does not explain why the documents sought are
necessary to the disposition of this motion or even what information she hopes the
documents will reveal. Id. Similarly, counsel states that Nationwide’s responses
to the plaintiff’s discovery requests are incomplete but by way of explanation only
states that their incompleteness has “raised issues for further discovery.” Id. More
explanation is necessary based on the standard in Cacevic.
Counsel also refers to a Certificate of Compliance wherein Nationwide
admits that it deleted three pages of requested discovery, Bate Stamp documents
332-334, “based upon Nationwide’s good faith operation of its our [sic] records
retention program.” [Record No. 35-11] According to Demus’ attorney, “[t]his
now requires inquiry (through written requests or deposition discovery) whether
Nationwide and its personnel have engaged in spoliation or other efforts to conceal
wrongdoing in the settlement of Plaintiff Demus’s claim.” [Record No. 35-13, pp.
But counsel fails to even convey what type of information she fears
Nationwide destroyed. Without more, the Court will not delay disposition of
summary judgment based on the possibility of future spoliation claims.5
Finally, counsel complains that her client, Demus, did not have sufficient
time to file an affidavit in support of his response to the motion for summary
[Record No. 35-13, p. 3]
She explains that she was waiting on
Nationwide’s discovery responses before completing this affidavit. Id. Counsel
[n]ot only are those responses not yet complete, but by the end of last
week Plaintiff had come down with the flu. He has not sufficiently
recovered that it is possible for him to assist in finalizing an affidavit,
particularly not in the fewer than 16 hours available following the
Court’s Virtual Order [DE 34] denying his unopposed motion to
postpone further briefing.
Id. Counsel did not need all of Nationwide’s discovery responses to draft an
affidavit on behalf of her client explaining his version of events in response to
Counsel only has proof, provided by Nationwide, that some evidence has been
destroyed. That, by itself, leaves the plaintiff far from proving a spoliation claim. Spoliation
sanctions require the party seeking them to prove: “(1) that the party having control over the
evidence had an obligation to preserve it at the time it was destroyed; (2) that the records
were destroyed “with a culpable state of mind”; and (3) that the destroyed evidence was
“relevant” to the party's claim or defense such that a reasonable trier of fact could find that it
would support that claim or defense.” Beaven v. United States Dept. of Justice, 622 F.3d
540, 553 (6th Cir. 2010).
Nationwide’s motion for summary judgment. Counsel had thirty-seven days, not
sixteen hours, to prepare a response and an affidavit addressing the merits of
Nationwide’s motion. The fact that she assumed that the Court would grant a
second extension did not require the Court to do so. See Dunning v. War Mem’l
Hosp., 534 F. App’x. 326, 331 (6th Cir. 2013) (Matters of trial management are in
the district court judge’s discretion.) In short, Neither Demus nor his attroney have
shown why the Court should further delay addressing the merits of the defendant’s
motion for summary judgment.
Nationwide has established that thear are no genuine issues of material fact
Furhter, as outlined herin, it is entitled to judgment in its favor
regarding all claims asserted by the plaintiff. Accordingly, it is hereby
ORDERED as follows:
Defendant Nationwide Property and Casualty Insurance Company’s
motion for summary judgment [Record No. 16] is GRANTED.
This action is DISMISSED, with prejudice, and STRICKEN from
the Court’s docket.
The pretrial conference, previously scheduled for March 9, 2016, and
the trial, previously scheduled for April 12, 2016, are CANCELED and SET
This 7th day of December, 2015.
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