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Barjuca v. State Farm Fire and Casualty Co.

United States District Court, Sixth Circuit

December 17, 2013



JOSEPH M. HOOD, Senior District Judge.

This matter is before the Court upon Defendant's Motion for Summary Judgment. [D.E. 18]. Plaintiff has filed a Response [D.E. 28], and Defendant filed its Reply. [D.E. 31]. This matter being fully briefed, and the Court being otherwise sufficiently advised, it is now ripe for the Court's review.

I. Procedural Background

Plaintiffs, Christian and Vicki Barjuca, owned a home at 102 Wind Ridge Road in Nicholasville, Kentucky. [D.E. 1-1 at 2]. On August 4, 2009, a lightning strike caused a gas line in the home to rupture, starting a fire in the Barjuca home. [D.E. 34-2 at 3-5; 35-1 at 5]. The fire caused extensive damage. Plaintiffs held a homeowners insurance policy with Defendant State Farm Fire & Casualty Company. [D.E. 18-11, 18-12, 18-13]. Pursuant to the policy, State Farm covered the cost to repair the home, albeit after a lengthy dispute, and living expenses during reconstruction of the home. See [D.E. 18-4 at 6-7]. Plaintiffs do not dispute that State Farm has met its obligations under the policy for repairing the home and for paying living expenses. [D.E. 34-6 at 6-7; 35-1 at 12-13].

After the fire, Servpro, a restoration company, came to the Barjuca residence in an attempt to mitigate the damage. [D.E. 34-4 at 1-2]. This included water and smoke mitigation efforts, as well as packing up personal property and storing it in a Servpro warehouse. Id. Plaintiffs were allowed to visit the Servpro warehouse to inventory the personal property contained in the boxes [D.E. 34-6 at 10; 35-2 at 1] but contend that they could not discover the true nature of the damage to the stored items until they moved back into their home. [D.E. 34-7 at 7-10; 35-2 at 1-2]. Plaintiffs moved back into their home eighteen months after the fire. [D.E. 34-3 at 1]. Plaintiffs and Defendant disagree about the damage to items of personal property and the amount which Plaintiffs are owed under the policy, prompting Plaintiffs to file this suit.

Plaintiffs filed their Complaint in Jessamine Circuit Court on August 3, 2011, asserting claims for breach of contract and bad faith against State Farm, as well as various claims against the manufacturer and installer of the alleged faulty gas line. [D.E. 1-1]. The Jessamine Circuit Court severed the claims against State Farm from the product liability claims. [D.E. 1-3 at 6]. Defendant then removed the action to this Court. [D.E. 1]. The Court construed a section of the parties' joint status report as a joint motion to bifurcate Plaintiffs' contract claims from Plaintiffs' bad faith claims, and granted that motion. [D.E. 7]. Thus, discovery on the bad faith claims was stayed, and the parties were ordered to conduct discovery on the breach of contract claims. Defendant now moves for summary judgment on the breach of contract claim and the bad faith claim.

Defendant asserts that summary judgment should be granted because Plaintiffs filed their claims outside the one-year limitations period contained within the insurance policy. [D.E. 18-1 at 8-11]. Plaintiffs contend the one-year limitations period within the policy should not be enforced because the one year period is unreasonable, the contractual limitations period should be excused due to impossibility of performance, and that State Farm should be equitably estopped from asserting the limitations period as a defense. [D.E. 28 at 4].

II. Standard of Review

A motion for summary judgment may only be granted "if the movant shows 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). "On summary judgment the inferences to be drawn from the underlying facts... must be viewed in the light most favorable to the party opposing the motion." United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). "The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a sufficient showing to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

III. Analysis

The one-year contractual limitations period is reasonable and is neither excused through impossibility of performance, nor is State Farm estopped from asserting it as a defense. Therefore, summary judgment for Defendant on the breach of contract claim is appropriate.

Plaintiffs first contend that the one-year contractual limitations period should not be enforced because it is unreasonable. [D.E. 26 at 4]. Defendant claims that the provision is reasonable because a long line of Kentucky cases have upheld similar one-year contractual limitation periods in insurance contracts. [D.E. 31 at 3-4].

"As a general rule, the construction and legal effect of an insurance contract is a matter of law for the court." Bituminous Cas. Corp. v. Kenway Contracting, Inc., 240 S.W.3d 633, 638 (Ky. 2007) (citations omitted). An insurance contract "must receive a reasonable interpretation consistent with the parties' object and intent or narrowly expressed in the plain meaning and/or language of the contract." St. Paul Fire & Marine Ins. Co. v. Powell-Walton-Milward, Inc., 870 S.W.2d 223, 226 (Ky. 1994). "In Kentucky, there is no statute proscribing contractual shortening of limitations periods. In fact, there is a provision in the Insurance Code, KRS 304.14-370, which allows foreign insurers to limit actions against them to one year." Webb v. Ky. Farm Bureau Ins. Co., 577 S.W.2d 17, 18 (Ky. Ct. App. 1978). "In addition to the code provision, there is a solid line of case law in Kentucky that upholds the validity of contractual terms that provide for shorter limitation periods than the general statute of limitations." Id. at 19. If the insurer includes a shorter limitations period, it will only be enforced if it is "reasonable and not otherwise prohibited by statute." Brown v. State Auto, 189 F.Supp.2d 665, 668-69 (W.D. Ky. 2001) (citing Webb, 577 S.W.2d at 18-19); see also Hobbs v. Am. Sec. Ins. Co., No. 3:08-cv-471-TBR, 2009 WL 366325, at *2 (W.D. Ky. Feb. 13, 2009) (citations omitted) ("Under the Sixth Circuit's understanding, the only way a limitations clause would be unenforceable under Kentucky law would be if it did not leave the insured a reasonable time in which to sue."). If the one year limitation period within the contract is reasonable, Defendant's motion for summary judgment must be granted. If the one-year limitation period is unreasonable, the Court must apply the fifteen year statute of limitations governing contracts, and Defendant's motion for summary judgment must be denied. See Brown v. State Auto, 189 F.Supp.2d at 668 ("[I]f the two year contractual limitation in the policy is reasonable, the Plaintiff's complaint is time barred and must be dismissed. If the limitation is unreasonable, the fifteen year statute of limitations governing actions on written contracts applies and the Plaintiff's claims may proceed."); see also KRS 413.090(2) (establishing a fifteen year limitation period for written contracts).

Kentucky courts have consistently upheld one year contractual limitations periods in insurance policies as reasonable. See Edmonson v. Penn. Nat'l Mut. Cas. Ins. Co., 781 S.W.2d 753 (Ky. 1989) ("[T]here is no question in this case as to the validity of the limitation provided in the conditions of the policy."); Webb, 577 S.W.2d 17 (upholding as reasonable a one year contractual limitation in a homeowner's policy); Hale v. Blue Cross & Blue Shield of Ky., Inc., 862 S.W.2d 905, 907 (Ky. Ct. App. 1993) ("[O]ne year from the date of filing a medical claim is not unreasonable."); see also Elkins v. Ky. Farm Bureau Mut. Ins. Co., 844 S.W.2d 423, 424 (Ky. Ct. App. 1992) ("[T]he rights under a fire insurance policy can be ascertained on the date of the loss or soon thereafter, and one year is not an unreasonably short time to require that a suit be commenced."). Plaintiffs contend that the one-year limitation is not reasonable because they did not become aware that the damage to the personal property had not been repaired until after the one-year limitation period had passed. See [D.E. 28-2 at 4] ("As we began moving boxes of personal property into the newly repaired residence, it became obvious that the vast majority of the items were irreparably damaged due to the retained smell of smoke.").

Plaintiffs' assertions that they could not discover the damage to the personal property is undercut by the fact that they were given opportunities to inspect the property, both personally and by their agent, Mr. Howarth, well within the one-year limitations period. [D.E. 34-6 at 10; 35-2 at 1; 34-8 at 3]. Both Christian Barjuca, [D.E. 34-6 at 10], and Vicki Barjuca, [D.E. 35-2 at 1], gave deposition testimony that they went to the Servpro warehouse to inventory and inspect the property to determine what items of personal property were damaged. Christian Barjuca further testified to the following:

Q: Mr. Barjuca, I've showed you three - three copies that look like similar formats.... Now, I think you were telling - about to tell me that Mr. Howarth and his company prepared these?
A: Yes.
.. ...

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