York v. Miller
Filing
123
MEMORANDUM OPINION AND ORDER denying plaintiff's 81 MOTION for Partial Summary Judgment on the Issue of Substantially Prevailing; granting Defendant Property and Casualty Insurance Company of Hartford's 83 MOTION for Summary Judgm ent; denying as moot the balance of the pending motions in this case; directing that judgment be entered in favor of the defendant and that this case be dismissed and stricken from the docket of this court. Signed by Judge Joseph R. Goodwin on 3/4/2014. (cc: attys; any unrepresented party) (taq)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
ROBIN J. YORK, et al.,
Plaintiffs,
v.
CIVIL ACTION NO. 2:12-cv-06582
PROPERTY AND CASUALTY
INSURANCE COMPANY OF HARTFORD,
Defendant.
MEMORANDUM OPINION AND ORDER
Now before the court are Plaintiff’s Motion for Partial Summary Judgment on the Issue of
Substantially Prevailing [Docket 81], Defendant Property and Casualty Insurance Company of
Hartford’s Motion for Summary Judgment [Docket 83], Plaintiff’s Motions in Limine [Dockets
96-103], Plaintiff’s Motion to Strike Proffered Expert Peter Kensicki [Docket 104], Defendant
Property and Casualty Insurance Company of Hartford’s Motion to Exclude Testimony of
Plaintiff’s Putative Expert Charles Miller [Docket 106], and Defendant Property and Casualty
Insurance Company of Hartford’s Omnibus Motion in Limine [Docket 108]. These motions are
ripe for review. For the reasons set forth below, Plaintiff’s Motion for Partial Summary Judgment
on the Issue of Substantially Prevailing [Docket 81] is DENIED, Defendant Property and Casualty
Insurance Company of Hartford’s Motion for Summary Judgment [Docket 83] is GRANTED, and
the balance of the pending motions in this case are DENIED as moot.
I.
Background
This action arises out of an October 13, 2011 car accident in Mingo County, West Virginia.
The plaintiff’s decedent, Adam J. York, was a passenger in a car being driven by Joshua Miller.
Mr. York was pronounced dead shortly after the accident occurred. At the time of the accident, Mr.
York was insured under Policy No. 55 PHJ 175936 (the “policy” or the “Hartford policy”), issued
by defendant Property and Casualty Insurance Company of Hartford (“Hartford”). The policy was
issued to Chester and Robin York, Adam York’s parents, and provided underinsured motorist
coverage benefits to Adam York as an adult resident child of the Yorks. It is uncontested that Mr.
York and his parents resided in Kentucky, and that the policy was issued in Kentucky under
Kentucky law.
The parties dispute the interpretation of many of the facts in this case. It is undisputed that
on November 1, 2011, the plaintiff filed a lawsuit in the Circuit Court of Mingo County, West
Virginia, against Mr. Miller. By letter dated December 2, 2011, Mr. Miller’s liability insurer,
USAA, tendered his available bodily injury limits of $100,000 to compensate Adam York’s estate,
and that this tender was contingent upon a waiver of subrogation from Hartford. Thereafter, on
January 23, 2012, the plaintiff forwarded USAA’s letter to Hartford. The plaintiff alleges that this
letter included a request for the applicable subrogation waivers and a demand for the payment of
$100,000 in underinsured motorist coverage benefits under the Hartford policy. The plaintiff also
alleges that Hartford did not properly respond to this letter. Hartford contends that the plaintiff
failed to make a proper demand on Hartford under Kentucky law, and that it conducted a proper
investigation of the claim.
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On March 9, 2012, the plaintiff filed an amended complaint, naming Hartford as a
defendant and attempting to recover the $100,000 in underinsured motorist coverage benefits
provided by the policy. Hartford did not respond to the complaint, and the Circuit Court of Mingo
County entered default judgment against Hartford in the amount of $4,127,615.18 on June 12,
2012. (See J. Order, Circuit Court of Mingo County [Docket14-1]). Thereafter, Hartford removed
the case to this court. This court set aside the default judgment on October 3, 2013, and directed the
plaintiff to file an amended complaint. The plaintiff filed her Third Amended Complaint [Docket
78] on November 1, 2013. The remaining claims in the Third Amended Complaint are that the
plaintiff substantially prevailed against Hartford, common law bad faith, and statutory bad faith
under the West Virginia Unfair Trade Practices Act, W. Va. Code §33-11-1, et seq.
(“WVUTPA”).
On November 15, 2013, Hartford tendered payment of $100,000 to plaintiff’s counsel,
which plaintiff’s counsel accepted. The plaintiff contends this was the first time Hartford made a
payment or attempted to make a payment of the policy. Hartford contends that it made tenders of
the $100,000 policy amount in June, August, and September 2012. Hartford further argues that
plaintiff’s counsel intentionally ignored the tenders made by Hartford because it was focused on
obtaining the $4.1 million default judgment entered in state court.
Both parties have filed motions for summary judgment. The plaintiff requests a finding that
she substantially prevailed in recovering the underinsured motorist coverage from Hartford,
entitling the plaintiff to the reasonable attorney’s fees and damages. Hartford moves for summary
judgment on each of the plaintiff’s claims.
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II.
Legal Standard
To obtain summary judgment, the moving party must show that there is no genuine issue as
to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R.
Civ. P. 56(a). In considering a motion for summary judgment, the court will not “weigh the
evidence and determine the truth of the matter.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
249 (1986). Instead, the court will draw any permissible inference from the underlying facts in the
light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587-88 (1986).
Although the court will view all underlying facts and inferences in the light most favorable
to the nonmoving party, the nonmoving party nonetheless must offer some “concrete evidence
from which a reasonable juror could return a verdict in his [or her] favor[.]” Anderson, 477 U.S. at
256. Summary judgment is appropriate when the nonmoving party has the burden of proof on an
essential element of his or her case and does not make, after adequate time for discovery, a
showing sufficient to establish that element. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986). The nonmoving party must satisfy this burden of proof by offering more than a mere
“scintilla of evidence” in support of his or her position. Anderson, 477 U.S. at 252. Likewise,
conclusory allegations or unsupported speculation, without more, are insufficient to preclude the
granting of a summary judgment motion. See Felty v. Graves Humphreys Co., 818 F.2d 1126,
1128 (4th Cir. 1987); Ross v. Comm’ns Satellite Corp., 759 F.2d 355, 365 (4th Cir. 1985),
abrogated on other grounds, Price Waterhouse v. Hopkins, 490 U.S. 228 (1989).
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III.
Choice of Law
Before addressing the substantive arguments in the parties’ motions for summary
judgment, I must determine what law to apply to these disputes. In the Memorandum Opinion &
Order issued on October 3, 2013, I found that Kentucky law applied in this case. (See Mem. Op. &
Order [Docket 67], at 11, n.1 (“West Virginia’s choice of law rules dictate that I apply Kentucky
law here because the insurance policy was issued in Kentucky.” (citing Lee v. Saliga, 373 S.E.2d
345, 348 (W. Va. 1988))). This was in the context of the underinsured motorist claim, which none
of the parties dispute was governed by Kentucky law. The parties now dispute whether Kentucky
law or West Virginia law applies to the remaining claims in this case. The parties also dispute
whether tort choice of law rules or contracts choice of law rules govern the plaintiff’s claims.
The automobile insurance policy in question was issued to Chester and Robin York in
Kentucky. The Yorks were residents of Kentucky at the time the insurance policy was purchased,
and the policy is called a “Kentucky auto insurance policy.” (Def. Prop. & Cas. Ins. Co. of
Hartford’s Mem. in Supp. of its Mot. for Summ. J. (“Def.’s Mem. in Supp.”) [Docket 84], at 4).
The Yorks filled out a Kentucky auto insurance application and Kentucky underinsured motorist
application to obtain the policy. (Id.). Adam York was covered by this policy as an adult resident
son of the Yorks in their Kentucky home. (Id. at 1). None of these facts are contested by the
plaintiff.
Under either contract or tort choice of law rules, Kentucky has the most significant
relationship to the events in this case. The plaintiff’s main argument against the application of
Kentucky law is that Adam York’s injury occurred at the place of the accident, in Mingo County,
West Virginia. This overlooks the fact that this is not a wrongful death action against the person
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responsible for Mr. York’s death. Rather, this is a bad faith action against Hartford. The injury, if
any, did not occur when Mr. York was killed—it occurred when the alleged torts were committed
by Hartford.
In an unpublished case, Yost v. Travelers Ins. Co., 181 F.3d 95, 1999 WL 409670 (4th Cir.
1999), the Fourth Circuit analyzed a similar factual situation. In Yost, the appellant was injured in
a car accident near Morgantown, West Virginia. 1999 WL 409670, at *1. The appellant sued
Travelers Insurance Company, the insurer of the car that had struck her, alleging bad faith and
unfair practices under the WVUPTA. Id. The car that struck the appellant was owned by a
Pennsylvania resident, titled and stored in Pennsylvania, and insured through a Pennsylvania auto
insurance policy. Id. Using tort choice of law principles, the Fourth Circuit determined that
Pennsylvania law applied in that case because it had the most significant relationship to the
occurrence at issue. Id. at *5.
While the Supreme Court of Appeals of West Virginia has never expressly adopted the
Restatement (Second) of Conflict of Laws for determining what law to apply in contracts cases,
the court has often relied on it when resolving conflicts questions. See Pen Coal Corp. v. William
H. McGee & Co., Inc., 903 F. Supp. 980, 983-84 (S.D. W. Va. 1995) (collecting cases); see also M
& S Partners v. Scottsdale Ins. Co., 277 F. App’x 286, 289 (4th Cir. 2008) (internal citations
omitted) (“West Virginia courts generally use lex loci deliciti to resolve choice of law conflicts,
but for ‘particularly thorny conflicts problems,’ the West Virginia Supreme Court of Appeals has
relied on the Restatement (Second) of Conflict of Laws (1971), Sections 6 and 145, to provide the
framework for determining the applicable law. When reviewing complex contracts and ‘parasitic’
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torts—i.e., torts dependent upon an underlying breach of contract claim—West Virginia courts
have resorted to using the Restatement.”) (internal citations omitted).
“Section 145 of the Restatement sets forth four sorts of ‘contacts’ to be taken into account,
while § 6 lists seven ‘factors’ relevant to the choice of law.” Yost, 1999 WL 409670, at *3. The
contacts in Section 145 include: “(a) the place where the injury occurred, (b) the place where the
conduct causing the injury occurred, (c) the domicil, residence, nationality, place of incorporation
and place of business of the parties, and (d) the place where the relationship, if any, between the
parties is centered.” Restatement (Second) of Conflict of Laws § 145 (1971). An analysis of these
contacts shows that Kentucky law applies in this case.
First, the place where the injury occurred was Kentucky, not West Virginia. The Yorks are
residents of Kentucky, Mr. York was a resident of Kentucky, and the insurance policy at issue was
a Kentucky policy, issued in Kentucky. When Hartford allegedly injured the Yorks, their actions
were directed at Kentucky residents and Mr. York’s Kentucky estate. Additionally, as in Yost, “the
worry, annoyance, and economic hardship of the delay in receiving compensation would have
been suffered” in the plaintiff’s state of residency, not the state where the accident occurred. 1999
WL 409670, at *3.
Second, the place where the conduct causing the injury occurred was not Kentucky or West
Virginia. The claims adjuster for Mr. York’s claim, Sandy Green, was located in Indianapolis,
Indiana, and frequently worked on Kentucky claims. (Green Aff. [Docket 7-2] at ¶¶ 4, 14). Ms.
Green did not work on West Virginia claims. (Id. at ¶ 14). The plaintiff has produced no evidence
that any of Hartford’s allegedly tortious conduct originated in West Virginia.
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Third is the domicil, residence, nationality, place of incorporation and place of business of
the parties. Hartford is a foreign corporation and is headquartered in Connecticut. It does business
nationwide. The Yorks are residents of Kentucky, and Mr. York was a resident of Kentucky prior
to his death.
Fourth is the place where the relationship, if any, between the parties is centered. The
relationship between the Yorks and Hartford is centered in Kentucky. The relationship exists
because of a Kentucky insurance policy, issued to residents of Kentucky, in the state of Kentucky.
In addition to the Section 6 contacts, I also examine the Section 145 factors. The Yost court
concluded that the Section 145 contacts and Section 6 factors both favored the application of
Pennsylvania law. The relevant provisions of Section 6 noted by the court included the needs of
the interstate system, basic policies of the area of law, and West Virginia’s particular policy as
compared to that of other interested states. See Yost, 1999 WL 409670, at *4. It noted that
[t]he first factor—the needs of the interstate system (§ 6(2)(a))—is a reminder of
the interstate nature of commerce and many other activities and of the need for
harmonious relations between states. No state should be overly eager to apply its
own law to a dispute in which some other state is more interested, even if the forum
state is convinced of the superiority of its own law. The final two factors (§ 6(2)(f),
(g)) simply give us goals—predictability and ease of application—that may well
elude us given the fact-bound nature of the inquiry and the generality of the
Restatement criteria.
Id. The court determined that the purpose of laws such as the WVUPTA is “to ensure fair play by
insurance companies,” and “the character of such laws is protectionist. In other words, West
Virginia’s law is designed as it is in order to protect the citizens of West Virginia.” Id. (emphasis in
original). Additionally, West Virginia and Pennsylvania had differing laws regarding whether
third parties, such as the appellant, could bring actions against the insurer. Id. at 5. The court found
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that this different balance struck by each state also weighed in favor of applying Pennsylvania law.
As the court noted,
This careful legislative balancing makes the last Restatement factor—“the
protection of justified expectations” (§ 6(2)(d))—all the more important, and it
weighs heavily in favor of Pennsylvania law. Travelers is involved in this case
solely on account of a contract with a Pennsylvania resident insuring Pennsylvania
property, and surely both parties to that contract would be justified in believing that
Pennsylvania law would govern Travelers’ conduct. On the other hand, there is no
evidence or suggestion that Mrs. Yost drove into West Virginia with the
expectation that she could sue a third-party insurer should some calamity befall her.
Id. at *5.
I agree with the reasoning of the Yost court. This is a case relating to a Kentucky insurance
policy, held by residents of Kentucky. The only relevant conduct in West Virginia was a car
accident that happened to occur here. As in Yost, “[h]ere too we have an alleged tort, and here too
the tort could not exist absent a contract governed by another state’s law. Finally, in this case the
connection with West Virginia was not only inconsequential, but also literally accidental. The
applicability of West Virginia law does not turn on such a ‘fortuity.’” Id. (quoting Lee v. Saliga,
373 S.E.2d 345, 352 (W. Va. 1988)).
This result is consistent with West Virginia jurisprudence. While the remaining claims are
sounding in tort, none of them would exist absent the underlying contractual relationship between
the Yorks and Hartford, which is undisputedly governed by Kentucky law. It would be illogical to
apply the law of Kentucky to the contractual relationship of the parties but West Virginia law to
tort claims arising out of that contractual relationship. As the Supreme Court of Appeals of West
Virginia has noted,
[t]he usual coincidence of the insurance agent, insured, and the risk in the same
state dictates that the parties would be more familiar with that state’s insurance
statutes, which often supplement or control the policy provisions. This law should
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control the reasonable expectation of the parties, rather than that of another state
whose only connection to the dispute is the fortuity that the accident occurred there.
373 S.E.2d at 352.
Based upon the foregoing, I FIND that Kentucky law applies to the plaintiffs’ claims.
IV.
Motions for Summary Judgment
The plaintiff’s claims are all based upon the allegations in the Third Amended Complaint
[Docket 78]. The Third Amended Complaint only alleges causes of action premised on West
Virginia law. However, the parties discussed the application of both West Virginia and Kentucky
law in the summary judgment briefing, and neither party asked for additional briefing on choice of
law issues. Therefore, I will construe the complaint as making allegations under Kentucky law.
The remaining claims in this case are that the plaintiff substantially prevailed against Hartford, and
statutory and common law bad faith.
A. Whether the Plaintiff Substantially Prevailed Against Hartford
The plaintiff argues that she is entitled to summary judgment on the issue of whether she
substantially prevailed in obtaining first-party insurance policy benefits under the WVUPTA.
However, I have determined that West Virginia law is not applicable in this case. There does not
appear to be an analogous cause of action under Kentucky law, and the plaintiff does not argue that
an analogous cause of action exists. Therefore, Plaintiff’s Motion for Partial Summary Judgment
on the Issue of Substantially Prevailing [Docket 81] is DENIED, and Defendant’s Motion for
Summary Judgment is GRANTED with regard to this issue.
B. Statutory and Common Law Bad Faith
Hartford moves for summary judgment on each of the plaintiff’s claims. Hartford argues
that the plaintiff failed to perfect her underinsured motorist claim under Kentucky law, and that
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even if the plaintiff had perfected her claim, mere delay does not give rise to a claim of bad faith
under Kentucky law. The plaintiff argues that she has sufficiently demonstrated that Hartford
acted in bad faith under Kentucky’s heightened standard.
Like West Virginia, Kentucky provides for both statutory and common law bad faith
claims. See United Servs. Auto. Ass’n v. Bult, 183 S.W.3d 181, 186 (Ky. Ct. App. 2003) (“Actions
for bad faith insurance claims settlements in Kentucky may arise either under common law or by
way of the Unfair Claims Settlement Practices Act, KRS7 304.12–230.”); see also Ky. Rev. Stat.
Ann. § 304.12-230; Ky. Rev. Stat. Ann. § 446.070; Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d
437, 451 (Ky. 1997). However, unlike West Virginia, Kentucky has a heightened pleading
standard for bad faith claims.
An insured must prove three elements in order to prevail against an insurance
company for alleged refusal in bad faith to pay the insured’s 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. An 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).
The evidentiary threshold is high indeed. Evidence must demonstrate that an
insurer has engaged in outrageous conduct toward its insured. Furthermore, the
conduct must be driven by evil motives or by an indifference to its insured’s rights.
Absent such evidence of egregious behavior, the tort claim predicated on bad faith
may not proceed to a jury. Evidence of mere negligence or failure to pay a claim in
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.
Bult, 183 S.W.3d at 186.
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Hartford argues that the plaintiff cannot demonstrate a reasonable dispute of material fact
for any of these elements. I will begin by discussing the third element: knowledge and/or reckless
disregard. This element places a significant burden on the plaintiffs. “Mere negligent failure to
settle within the policy limits or errors of judgment are insufficient to constitute bad faith,” and
“mere delay in payment does not amount to outrageous conduct absent some affirmative act of
harassment or deception.” Glass, 996 S.W.2d at 451, 452. The plaintiff must provide “proof or
evidence supporting a reasonable inference that the purpose of the delay was to extort a more
favorable settlement or to deceive the insured with respect to the applicable coverage.” Id. at
452-53.
The plaintiff argues that she has presented sufficient facts to withstand summary judgment.
Specifically, she argues that despite knowing the plaintiff would prevail, Hartford “attempted to
avoid liability through technicalities, misrepresentations, and diversion of attention” before
eventually paying the limits of the policy. (Pl.’s Mem. in Opp. [Docket 87], at 19-20). The parties
disagree regarding whether Hartford made a tender of the policy before November of 2013.
However, whether Hartford made or did not make tenders of the policy prior to the settlement date
is a moot point. All of the evidence presented by the plaintiff relates to Hartford’s alleged delay in
tendering the policy. (See Pl.’s Mem. in Opp. [Docket 87], at 2-6)). The plaintiff does not present
any evidence that Hartford “engaged in outrageous conduct toward its insured,” or that Hartford’s
“conduct [was] driven by evil motives or by an indifference to its insured’s rights.” Bult, 183
S.W.3d at 186. “Bad faith must be more than bad judgment or negligence—it involves ‘moral
obliquity,’ ‘a breach of a known duty through some motive of interest or ill will’ or ‘actual intent to
mislead or deceive another.’” Budde v. State Farm Mut. Auto. Ins. Co., No. 5:09-CV-00053-TBR,
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2011 U.S. Dist. LEXIS 48022, 6-7 (W.D. Ky. May 4, 2011) (quoting Carruba v. Transit Cas. Co.,
443 F.2d 260, 261 (6th Cir. 1971)). I therefore FIND that the plaintiff has not demonstrated a
reasonable dispute of material fact that Hartford acted in bad faith under Kentucky law. For this
reason, Defendant’s Motion for Summary Judgment is GRANTED with regard to this issue.
V.
Conclusion
For the reasons discussed above, Plaintiff’s Motion for Partial Summary Judgment on the
Issue of Substantially Prevailing [Docket 81] is DENIED, Defendant Property and Casualty
Insurance Company of Hartford’s Motion for Summary Judgment [Docket 83] is GRANTED, and
the balance of the pending motions in this case are DENIED as moot. The court ORDERS that
judgment be entered in favor of the defendants and that this case be dismissed and stricken from
the docket of this court.
The court DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented party.
ENTER:
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March 4, 2014
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