The Cincinnati Specialty Underwriters Insurance Company v. C.F.L.P. 1, LLC
MEMORANDUM AND OPINION & ORDER by Judge David J. Hale on 11/9/2017; CSUs motion for summary judgment (D.N. 111) is GRANTED. Arcadias motion for leave to file a sur-reply (D.N. 121) is DENIED. A separate jgm. will be entered on this date.cc:counsel (ARM)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
THE CINCINNATI SPECIALTY
Civil Action No. 3:14-cv-40-DJH-DW
C.F.L.P. 1, LLC,
* * * * *
MEMORANDUM OPINION AND ORDER
Petitioner The Cincinnati Specialty Underwriters Insurance Co. (CSU) filed this action
seeking appointment of an umpire to resolve its insurance-coverage dispute with Respondent
C.F.L.P. 1, LLC, d/b/a Arcadia Apartments (Arcadia). (Docket No. 1) After extensive briefing
and argument, an umpire was appointed (see D.N. 78; D.N. 101), and an appraisal award was
issued. (See D.N. 106) CSU has now moved for summary judgment on Arcadia’s remaining
counterclaims of bad faith, which were bifurcated from the appraisal dispute. (D.N. 111; see
D.N. 81) CSU’s motion prompted yet another flurry of briefs from Arcadia’s counsel, who
sought a scheduling conference on the counterclaims and an extension of the response deadline
to allow for discovery concerning CSU’s alleged bad faith. (D.N. 112; D.N. 117) Those
motions were denied by Magistrate Judge Dave Whalin, who concluded that Arcadia had failed
to demonstrate a need for discovery or a litigation schedule as to the counterclaims. (D.N. 123)
Arcadia has also moved for leave to file a surreply in opposition to the summary-judgment
motion. (D.N. 121) For the reasons explained below, the motion for leave to file a surreply will
be denied, and CSU’s motion for summary judgment will be granted.
This case arises out of a hail-damage claim submitted under a commercial-property
insurance policy CSU issued to Arcadia. CSU paid $24,522.25 on the claim to cover damage to
siding on some of Arcadia’s buildings, but Arcadia maintained that it was entitled to more.
(D.N. 1, PageID # 2) To resolve the dispute, CSU invoked the policy’s appraisal provision,
[E]ach party will select a competent and impartial appraiser. The two appraisers
will select an umpire. If they cannot agree, either may request that selection be
made by a judge of a court having jurisdiction. The appraisers will state
separately the value of the property and amount of loss. If they fail to agree, they
will submit their differences to the umpire. A decision agreed to by any two will
(D.N. 7-2, PageID # 23) CSU’s appraiser, Marty Refka, appraised the siding-damage loss at
approximately $29,000, while Arcadia’s appraiser, Richard Michelson, determined that the loss
was more than $1,000,000. (D.N. 7-1, PageID # 19) Refka and Michelson were unable to agree
on an umpire, and so CSU filed this action petitioning the Court to appoint one. (D.N. 1)
CSU proposed three candidates for umpire, all of whom Arcadia claimed were biased in
favor of insurance companies in general or CSU in particular. (See D.N. 23, PageID # 409-11)
The Court rejected Acadia’s contention that a retired judge or other mediator would be
preferable, concluding that the policy contemplated an umpire with appraisal experience. (See
D.N. 78, PageID # 1475) The Court appointed CSU’s third nominee, Jeff Turley, based on
Turley’s “extensive experience serving as an umpire” and Arcadia’s failure to offer specific
objections concerning his supposed bias. (Id., PageID # 1476) Shortly thereafter, Arcadia
moved to disqualify Turley on the ground that he had a “pecuniary relationship with CSU.”
(D.N. 82, PageID # 1488) Following voir dire of Turley and supplemental briefing on the issue
(see D.N. 98), the Court concluded that Turley was capable of serving as an impartial umpire.
(D.N. 101) The Court explained its decision as follows:
During the March 16 conference, Turley stated that NCA Group—which
purchased his company, Turco, in 2013 and may handle claims for [CSU]—is not
his employer, does not limit the parties for whom he may perform appraisals, and
plays no other role in selecting or approving his appraisal assignments. His
compensation is not tied to NCA Group, and he would suffer no adverse
consequences from NCA Group if he ruled against CSU in this matter; nor does
he have any other interest, financial or otherwise, in the outcome of the dispute
between CSU and Arcadia. In short, the Court finds no grounds to disqualify
(D.N. 101, PageID # 1657-58)
The parties proceeded with the appraisal, and Turley issued an appraisal award of
$94,326.05. (See D.N. 106) Refka agreed with the award, thus rendering it binding under the
policy. (Id.; see D.N. 7-2, PageID # 23) When the parties failed to agree to a final resolution of
the case (see D.N. 110), CSU moved for summary judgment on Arcadia’s remaining
counterclaims. (D.N. 111) Arcadia opposes the summary-judgment motion (D.N. 116) and also
seeks leave to file a surreply, purportedly to address issues raised for the first time in CSU’s
reply. (D.N. 121) CSU opposes Arcadia’s request. (D.N. 122)
The Court agrees with CSU that the proposed surreply neither addresses a new argument
nor adds anything of substance to the parties’ briefing. It thus will not be permitted. And
because Arcadia has failed to establish a genuine issue of material fact as to its counterclaims,
the Court will grant CSU’s motion for summary judgment.
Summary judgment is required when the moving party shows, using evidence in the
record, “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); see 56(c)(1). For purposes of summary
judgment, the Court must view the evidence in the light most favorable to the nonmoving party.
Loyd v. Saint Joseph Mercy Oakland, 766 F.3d 580, 588 (6th Cir. 2014) (citing Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). However, the Court “need consider only the
cited materials.” Fed. R. Civ. P. 56(c)(3); see Shreve v. Franklin Cty., Ohio, 743 F.3d 126, 136
(6th Cir. 2014). If the nonmoving party “fails to properly support an assertion of fact or fails to
properly address another party’s assertion of fact as required by Rule 56(c),” the fact may be
treated as undisputed. Fed. R. Civ. P. 56(e)(2)-(3). To survive a motion for summary judgment,
the nonmoving party must establish a genuine issue of material fact with respect to each element
of each of his claims. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
CSU argues that summary judgment is warranted here because there is no evidence to
support the allegations underlying Arcadia’s bad-faith claims. (D.N. 111-1, PageID # 1685-88)
Counts II and III of Arcadia’s counterclaim allege bad faith under the Kentucky Unfair Claims
Settlement Practices Act and Kentucky common law, respectively. (D.N. 8, PageID # 44-46) To
prevail on either cause of action, Arcadia must establish that (1) CSU “was obligated to pay the
claim”; (2) CSU “lacked a reasonable basis for denying the claim”; and (3) CSU “knew that it
lacked a reasonable basis for denying the claim or acted with reckless disregard for whether there
was a reasonable basis for denying the claim.” Cox v. Empire Fire & Marine Ins. Co., 637 F.
App’x 904, 907 (6th Cir. 2016) (citing Wittmer v. Jones, 864 S.W.2d 885, 890 (Ky. 1993)).
“Kentucky’s evidentiary standard is high: a plaintiff must show that the ‘insurer has engaged in
outrageous conduct’ and that this conduct was ‘driven by evil motives or by an indifference to its
insureds’ rights.’” Id. (quoting United Servs. Auto. Ass’n v. Bult, 183 S.W.3d 181, 186 (Ky. Ct.
As an initial matter, CSU notes that it did not deny Arcadia’s hail-damage claim, but
simply paid less than Arcadia thought was appropriate.
(D.N. 111-1, PageID # 1685-86)
Arcadia does not dispute this point; instead, it argues that CSU acted in bad faith in connection
with the appraisal process. (See D.N. 116, PageID # 1710) Specifically, Arcadia contends that
CSU nominated biased candidates to serve as umpire. (Id.; see D.N. 8, PageID # 44)
Neither Arcadia’s counterclaim nor its response to the summary-judgment motion
suggests the existence of any proof on this point, however. Arcadia previously submitted
evidence that it believed would establish the purported bias. (See D.N. 78, PageID # 1475-76
(discussing Arcadia’s claims of bias and evidence offered in support)) None of that evidence
supports Arcadia’s bad-faith claims. (See id. & n.5) While one of the candidates, Gilbert
Arnold, was disqualified due to his involvement as an expert witness for CSU in another case,
that alone does not establish that he was impermissibly biased, much less that CSU nominated
him in bad faith. See Upington v. Commonwealth Ins. Co., 182 S.W.2d 648, 650 (Ky. 1944)
(citations omitted) (“The fact that each [appraiser nominated by an insurance company] had on
prior occasions acted as appraisers for insurance companies . . . does not disqualify them.”).
There is simply nothing in the record indicating that CSU “‘has engaged in outrageous
conduct’ . . . [that] was ‘driven by evil motives or by an indifference to its insureds’ rights.’”
Cox, 637 F. App’x at 907 (quoting Bult, 183 S.W.3d at 186).
The Court acknowledges that Arcadia has sought (and been denied) the opportunity to
take discovery on its bad-faith claims. Most recently, Arcadia’s counsel submitted an affidavit
pursuant to Federal Rule of Civil Procedure 56(d) seeking “an extension of time to conduct
discovery before” the Court considers CSU’s motion for summary judgment. (D.N. 117-1,
PageID # 1718) Judge Whalin found the affidavit inadequate, noting that in the Sixth Circuit, “a
motion under Rule 56(d) may be properly denied where the requesting party ‘makes only general
and conclusory statements  regarding the need for more discovery.’” (D.N. 123, PageID #
1751 (alteration in original) (quoting Ball v. Union Carbide Corp., 385 F.3d 713, 720 (6th Cir.
2004))) Because the affidavit “offer[ed] only a vague explanation of what [Arcadia] hopes to
uncover if additional discovery is permitted” and the Court’s prior questioning of Turley
resolved the issue of his alleged relationship with CSU, Judge Whalin denied Arcadia’s Rule
56(d) request. (D.N. 123, PageID # 1751-54) The Court fully agrees with Judge Whalin’s
conclusion—in nearly four years of litigation, Arcadia has uncovered nothing to justify a further
Throughout countless briefs, Arcadia has alluded to nefarious actions and intent on
CSU’s part. (See, e.g., D.N. 23; D.N. 76; D.N. 82; D.N. 116) Ultimately, however, the record
contains no proof supporting these allegations, and Arcadia has not shown that any is likely to be
(See D.N. 117-1; D.N. 123)
Summary judgment on Arcadia’s remaining
counterclaims is therefore appropriate. Accordingly, and the Court being otherwise sufficiently
advised, it is hereby
ORDERED as follows:
CSU’s motion for summary judgment (D.N. 111) is GRANTED.
Arcadia’s motion for leave to file a surreply (D.N. 121) is DENIED.
A separate judgment will be entered this date.
November 9, 2017
David J. Hale, Judge
United States District Court
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