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Southern Financial Life Ins. Co. v. Combs

Supreme Court of Kentucky

November 21, 2013

SOUTHERN FINANCIAL LIFE INSURANCE COMPANY, Appellant
v.
Honorable Steven D. COMBS, Judge, Pike Circuit Court, Appellee and Roger Mullins, Administrator of The Estate of Valerie Mullins, on Behalf of Himself and All Others Similarly Situated, Real Party in Interest.

Page 922

[Copyrighted Material Omitted]

Page 923

Joseph L. Hamilton, Marjorie Ann Farris, Chadwick Aaron McTighe, Stites & Harbison, PLLC, Jason Charles Kuhlman, Jeffrey C. Mando, Adams, Stepner, Wolterman & Dusing, PLLC, Russell H. Davis, Jr., Baird & Baird, PSC, for Appellant.

Steven Daniel Combs, pro se.

Herman Michael Lucas, Miller Kent Carter & Michael Lucas, PLLC, Kathleen Clark Knight, Richard Eric Circeo, Wilkes & McHugh, PA, for Real Party in Interest.

OPINION

MINTON, Chief Justice.

Southern Financial Life Insurance Company sells credit life and disability insurance through lending institutions, mostly banks and car dealerships. In a class action brought against Southern Financial by purchasers of its credit life and disability policies in Kentucky, the trial court entered a discovery order compelling Southern Financial to produce certain loan information and documents regarding the putative class members and the insurance sold to them. Southern Financial objected to the discovery, arguing that the requested loan information and documents were not in its " possession, custody or control" within the meaning of Kentucky Rules of Civil Procedure (CR) 34.01. The requested information, according to Southern Financial, is in the hands of nonparties, the lenders. Applying principles of general agency law, the trial court overruled the objection.

Southern Financial now seeks a writ of prohibition to prevent the trial court's enforcement of that discovery order. The Court of Appeals, where this writ action originated, declined to issue a writ; and Southern Financial appeals to this Court as a matter of right.[1]

Page 924

Southern Financial contends that the Court of Appeals erred in declining to issue a writ based on its finding that an adequate remedy, outside the issuance of a writ, existed on appeal. We now affirm the denial of the writ but for different reasons. Based on our analysis of general agency law and its interplay with CR 34.01, we conclude that no writ should issue because the trial court has committed no error.

I. FACTUAL AND PROCEDURAL HISTORY.

Southern Financial is an insurer that sells disability and life insurance to help borrowers make loan payments in the event that the insured borrower becomes disabled or dies before the loan is paid off. In issuing these policies, Southern Financial did not directly solicit the insureds. Instead, the lending institutions offered Southern Financial's product with a lump-sum premium that was often included in the amount loaned to the borrower.

The underlying action from which this writ is being sought was filed by Roger Mullins as executor of his wife's estate. The suit alleges that Southern Financial did not properly pay disability benefits that his late wife was entitled to under the terms of her Southern Financial disability policies. [2] Alleging that this underpayment of benefits was the result of a pattern of practice applicable to each policy issued by Southern Financial, Mullins's claims were certified as a class action.[3]

In furtherance of his claims against Southern Financial, Mullins, on behalf of the class, propounded written discovery upon Southern Financial seeking, as is relevant here, information regarding all of the loans that were insured by Southern Financial's product. The discovery request that is at the core of the instant controversy is interrogatory number two in Plaintiff's First Set of Merits Interrogatories to Defendant.[4] The discovery sought includes information, such as the date of initiation of the insured loans, date of termination or satisfaction of the insured loans, reason for the termination of the insured loans, the interest rates of the insured loans, and the amount of the monthly payments under the insured loans, among other information generally pertaining to the interplay between the underlying loans and the insurance provided by Southern Financial.

Southern Financial objected to the disclosure of the requested discovery, arguing that the loan information was not in its " possession, custody or control" within the meaning of CR 34.01. Instead, Southern Financial argued that the sought-after discovery materials were in the possession of the individual lenders. The trial court overruled Southern Financial's objections and entered an order, dated March 17, 2011, compelling Southern Financial's ...


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