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Carneal v. Travelers Casualty Insurance of America

United States District Court, Sixth Circuit

November 5, 2013

J.T. CARNEAL, et al., Plaintiffs,


THOMAS B. RUSSELL, Senior District Judge.

This matter is before the Court upon Defendant Travelers Casualty Insurance of America's Motion for Partial Summary Judgment. (Docket No. 21.) Plaintiffs J.T. Carneal d/b/a J.T. Carneal Enterprises and Suzanne Roberts d/b/a Anne's Bridals, LLC, have responded, (Docket No. 26), and Defendant has replied, (Docket No. 29). This matter is now ripe for adjudication. For the reasons that follow, the Court will GRANT Defendant's Motion for Partial Summary Judgment and DISMISS Plaintiffs' bad faith claims.


This litigation arises out of water damage to Plaintiffs' building and inventory on or about September 9, 2010. On September 14, 2010, a claim was made for that damage under a policy of insurance issued by Defendant to Anne's Bridals. On September 21, 2010, Defendant retained OnTheRock Engineering, LLC, to perform an investigation of the property and determine the source of the water damage. By letter of September 29, 2010, Defendant informed Plaintiff Roberts that it was proceeding with an investigation of her claim. OnTheRock Engineering issued its report on October 1, 2010, in which it concluded that the two sources of moisture infiltration had not been caused by storm damage but instead were the result of improper installation of the EPDM rubber membrane roof. Then, by letter of November 21, 2010, Defendant informed Plaintiff Roberts that it was denying her claim. In that letter, Defendant identified the facts and policy provisions on which its decision had been made, specifically quoting the policy's exclusion for damage caused by "faulty, inadequate or defective... repair, construction, renovation, remodeling [or] materials used in repair, construction, renovation, or remodeling." (Docket No. 21-1, at 46-47.) Defendant stated that it was denying Plaintiff Roberts' claim based on that policy provision and on the investigation and report of its expert, OnTheRock Engineering.

Plaintiffs originally filed this action in McCracken Circuit Court on September 7, 2012. In Count II their Complaint, Plaintiffs allege that Defendant violated the Kentucky Unfair Claims Settlement Practices Act (UCSPA), Ky. Rev. Stat. § 304.12-230, by (1) failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under the policy; (2) refusing to pay the Plaintiffs' claims without conducting a reasonable investigation based upon all available information; (3) failing to affirm or deny coverage of the Plaintiffs' claims within a reasonable time; and

(4) not attempting in good faith to effectuate a prompt, fair, and equitable settlement of the Plaintiffs' claim; and (5) failing to promptly provide a reasonable explanation, based on facts and the policy of insurance, for its decision to deny Plaintiffs' claim.


The propriety of summary judgment is governed by Rule 56 of the Federal Rules of Civil Procedure. Plaintiffs argue that "[i]t is generally accepted that Kentucky has a restrictive standard for summary judgment as set out in Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky. 1991)." (Docket No. 26, at 1.) Contrary to Plaintiffs' position, however, though the substantive law of Kentucky is applicable here pursuant to Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), a federal court sitting in diversity applies the standards of Federal Rule of Civil Procedure 56, not "Kentucky's summary judgment standard as expressed in Steelvest, Inc. v. Scansteel Serv. Ctr., Inc. " Gafford v. Gen. Elec. Co., 997 F.2d 150, 165 (6th Cir. 1993) (citation omitted), abrogated on other grounds by Hertz Corp. v. Friend, 130 S.Ct. 1181 (2010); accord Tompkins v. Crown Corr, Inc., 726 F.3d 830, 837 n.4 (6th Cir. 2013) ("[A] federal court sitting in diversity uses the federal standard for summary judgment."); Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 374 (6th Cir. 2009) ("The availability of summary judgment in diversity actions is governed by the federal standard, embodied in Fed.R.Civ.P. 56, rather than by state law.").

Under Rule 56, summary judgment is appropriate where "the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "[N]ot every issue of fact or conflicting inference presents a genuine issue of material fact." Street v. J.C. Bradford & Co., 886 F.2d 1472, 1477 (6th Cir. 1989). The test is whether the party bearing the burden of proof has presented a jury question as to each element in the case. Hartsel v. Keys, 87 F.3d 795, 799 (6th Cir. 1996). The Plaintiffs must present more than a mere scintilla of evidence in support of their position; they must present evidence on which the trier of fact could reasonably find for them. Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). Mere speculation will not suffice to defeat a motion for summary judgment: "[T]he mere existence of a colorable factual dispute will not defeat a properly supported motion for summary judgment. A genuine dispute between the parties on an issue of material fact must exist to render summary judgment inappropriate." Monette v. Elec. Data Sys. Corp., 90 F.3d 1173, 1177 (6th Cir. 1996), abrogated on other grounds by Lewis v. Humboldt Acquisition Corp., Inc., 681 F.3d 312 (6th Cir. 2012).

In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). But "[a] party asserting that a fact cannot be or is genuinely disputed must support the assertion by: citing to particular parts of materials in the record [or] showing that the materials cited do not establish the absence or presence of a genuine dispute." Fed.R.Civ.P. 56(c)(1). "The court need consider only the cited materials, but it may consider other materials in the record." Fed.R.Civ.P. 56(c)(3). Finally, "[i]f a party... fails to properly address another party's assertion of fact as required by Rule 56(c), the court may:... consider the fact undisputed [or] grant summary judgment if the motion and supporting materials-including the facts considered undisputed-show that the movant is entitled to it." Fed.R.Civ.P. 56(e)(2)-(3).


Generally, the Kentucky UCSPA, Ky. Rev. Stat. § 304.12-230, "is intended to protect the public from unfair trade practices and fraud' and imposes what is generally known as the duty of good faith and fair dealing owed by an insurer to an insured.'" Phelps v. State Farm Mut. Auto. Ins. Co., 680 F.3d 725, 731 (6th Cir. 2013) (internal citations omitted) (quoting State Farm Mut. Auto. Ins. Co. v. Reeder, 763 S.W.2d 116, 118 (Ky. 1988); Knotts v. Zurich Ins. Co., 197 S.W.3d 512, 515 (Ky. 2006)). "The UCSPA fundamentally requires that a good faith attempt be made to effectuate a prompt, fair and equitable settlement.'" Id. (quoting Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d 437, 454 (Ky. 1999)). Under the UCSPA, insurance companies are prohibited from engaging in seventeen enumerated acts or omissions. See Ky. Rev. Stat. § 304.12-230(1)-(17). Though Plaintiffs do not identify the particular subsections on which their bad faith claims are based, they appear to allege that Defendant violated the following subsections:

(2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims ...

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