United States District Court, E.D. Kentucky, Northern Division
For Chad Price, Plaintiff: James Richard Reid, LEAD ATTORNEY, Raymond S. Bogucki, Maysville, KY; Raymond S. Bogucki , LEAD ATTORNEY, Maysville, KY.
For Agrilogic Insurance Services, LLC, Occidental Fire and Casualty Insurance Company of North Carolina, Defendants: Bradley E. Cunningham, Mark S. Fenzel, LEAD ATTORNEYS, Middleton & Reutlinger, Louisville, KY.
MEMORANDUM OPINION AND ORDER
David L. Bunning, United States District Judge.
Defendants Occidental Fire & Casualty Insurance Company of North Carolina and
AgriLogic Insurance Services, LLC (collectively referred to hereinafter as " AgriLogic" ) move for summary judgment on Plaintiff Chad Price's (hereinafter " Price" ) breach of contract and bad faith claims, arguing that they are time barred by a contract provision limiting the time in which to bring suit. In the alternative, AgriLogic maintains that summary judgment on the bad faith claim is appropriate because Price failed to establish AgriLogic's obligation to pay and did not present sufficient evidence of outrageous conduct by AgriLogic. The Court has original jurisdiction over this removed action pursuant to 28 U.S.C. § 1332.
I. Factual and Procedural Background
Price is a Central Kentucky farmer who tends a corn crop in Mason County and two burley tobacco crops in Bourbon and Nicholas Counties. (Doc. # 6-3 at 2). In Spring 2012, Price began working with his insurance broker, Pro-Line Insurance Services (hereinafter " Pro-Line" ), to obtain crop insurance for the upcoming growing season. (Doc. # 7-1 at 1). Price and Pro-Line insured his crops with Multi-Peril Crop Insurance (Policy Number 1017656) issued by AgriLogic. (Docs. # 7-13). With further assistance from Pro-Line, Price then applied for two Crop-Hail policies to cover his corn and tobacco crops against additional perils. (Docs. # 6-21 and 6-22).
On July 10, 2012, AgriLogic issued a Crop-Hail Policy with Wind Guard and Extra Harvest Expense Endorsement (Policy Number 8006659) (hereinafter " the corn policy" ), which insured Price's corn crop against direct loss caused by hail, fire, lightning or transit. (Docs. # 6-3 at 2 and 6-6 at 1). The Wind Guard and Extra Harvest Expense Endorsement (hereinafter " the endorsement" ) provided further coverage for " wind damage, including green snap  and additional harvest expenses." (Doc. # 7-14 at 4). The endorsement defines " additional harvest expenses" as follows:
The stalks of the insured crop on the unit are blown down by wind to the extent that the angle between the stalk and the ground is less than 20 degrees and the distance from the shank end of the highest ear on the stalk to the ground is less than 12 inches, but could still be mechanically harvested.
( Id. ). Price's corn corp was insured up to a $356,000 policy limit, with a whole dollar premium of $7,476. (Doc. # 6-23 at 3).
The following day, AgriLogic issued a Crop-Hail Policy with Tobacco Wind Endorsement (Policy Number 8006765) (hereinafter " the tobacco policy" ), which insured Price's burley tobacco crops against direct loss caused by hail, fire, lightning and wind with hail. (Doc. # 6-3 at 2). The tobacco crops were insured up to a $300,300 policy limit, with a whole dollar premium of $35,936. (Doc. # 6-23 at 4).
AgriLogic's Crop-Hail Policies generally impose the following duties on an insured: (1) provide written notice of probable loss within ten days after the occurrence of one of the insured perils; (2) care for each damaged field of insured crop until AgriLogic has examined it; (3) allow AgriLogic to examine the damaged crop as often as reasonably required; (4) provide a complete harvesting and marketing record of each insured crop upon request; (5) submit to an examination under oath upon request; (6) sign a Withdrawal of Claim if an inspection determines that there is no
payable loss under the terms of the policy; (7) submit a signed statement in proof of loss, declaring your loss and interest in the crop, within sixty days of loss; and (8) if a claim is made on other insurance arising from the same occurrence for which a claim is made on this policy, provide AgriLogic with all claims material relating to other insurance upon request. (Doc. # 6-6 at 3). In return, AgriLogic has a duty to adjust all losses and pay the loss within thirty days after reaching an agreement with the insured, entry of a final judgment or the filing of an appraisal award. ( Id. ).
Section 16 of the Crop-Hail Policy's General Provisions sets out the following conditions for filing suit against AgriLogic:
You cannot bring suit or action against us unless you have complied with all of the policy provisions.
If you do enter suit against us you must do so within 12 months of the occurrence causing loss or damage.
( Id. at 5).
On July 20, 2012, less than two weeks after issuance of the corn and tobacco policies, Price's crops were allegedly damaged by wind and/or hail. (Doc. # 6-24). In accordance with the policy terms, Pro-Line sent AgriLogic a Notice of Loss on Price's behalf five days later. ( Id. ). The Notice listed the primary cause of damage as hail. ( Id. ). However, the National Weather Service has no record of hail in Kentucky on the date of the alleged loss. (Doc. # 6-10). According to Beverly Todd, Pro-Line's office manager, the broker erroneously labeled paperwork that was later submitted on behalf of Price and several other farmers in the region. (Doc. # 7-1 at 1-2). Specifically, these claims were filed for hail damage when they should have been submitted for both hail and wind damage. ( Id. ). Upon discovery of this clerical error, Pro-Line notified AgriLogic that the claims should have been filed as wind with hail damage and the necessary corrections were made. ( Id. ).
After receiving notice of the alleged damage, AgriLogic began investigating Price's claims and adjusting the losses. (Doc. # 6-3 at 3). On October 30, 2012, Price and Mike McNew, one of AgriLogic's independent adjusters, submitted a Green Snap Wind Guard Appraisal Worksheet and Loss Adjustment Worksheet, purporting to verify the losses to Price's corn crop. (Docs. # 6-3 at 3 and 6-11). Around this time, AgriLogic discovered that McNew had improperly adjusted Price's claim under the corn policy. (Doc. # 6-3 at 3). Because McNew had a history of adjustment errors and procedural non-compliance, AgriLogic ceased using his services and initiated its own investigation of Price's claim. ( Id. ).
On November 2, 2012, AgriLogic investigator Geno Herges conducted a ground level audit of Price's corn crop. ( Id. ). As Herges' photographs show, there was no evidence of wind damage. (Doc. # 6-12). About five days later, AgriLogic investigators conducted an aerial survey of Price's corn crop. (Docs. # 6-3 at 4 and 6-13). These investigators also found no evidence of wind damage. ( Id. ).
According to Travis Laine (hereinafter " Laine" ), AgriLogic's Product Implementation Manager, the lack of supporting weather data and photographic evidence gave AgriLogic reason to doubt the legitimacy of Price's claim. (Doc. # 6-3 at 4). AgriLogic asked Price's attorney, J. Richard Reid (hereinafter " Reid" ), to provide additional evidence, such as production records or photographs, that might substantiate the claim. (Doc. # 6-14). In response, Reid asked that AgriLogic's " request be specific and [ ] state exactly what documentation you are seeking and an explanation of why you assert the documentation
requested should be in our possession." (Doc. # 6-15). AgriLogic explained that it " did not presuppose that any particular item of information is in you or your clients' possession, but merely requests that any information tending to support the claimed losses be produced." (Doc. # 6-16). AgriLogic further stated that productions records and photographs were simply examples of documentation that would assist in its claim verification efforts. ( Id. ).
By December 21, 2012, AgriLogic had not received any information from Reid, so it reiterated its request for further documentation. (Doc. # 6-17). About one week later, Reid sent AgriLogic production records and photographs of damage to the corn crop. (Doc. # 6-18). According to Laine, the photographs " were of poor quality, contained no frame of reference or authentication, and were taken at close range." (Doc. # 6-3 at 5). Moreover, the photographs " did not clearly indicate that [Price's] corn had sustained wind damage and were not consistent with the numerous aerial photographs and aerial video footage taken by AgriLogic's investigators just weeks earlier." ( Id. ).
On February 28, 2013, AgriLogic denied Price's claim under the corn policy. (Doc. # 6-20). In its letter of denial, AgriLogic explained that Price's initial Notice of Loss reported hail damage to his corn crop, which was inconsistent with National Weather Service reports for the date of the alleged loss. ( Id. ). Because the Worksheets submitted by Price reported wind damage, AgriLogic conducted field audits and aerial surveys of his corn crop. ( Id. ). However, these audits showed that the fields in question sustained no payable damage for wind." ( Id. ).
While AgriLogic processed Price's claim under the corn policy, his claim under the tobacco policy was also pending. (Doc. # 6-19). On January 30, 2013, AgriLogic determined that the total indemnity amount was $215,085, deducted the appropriate premium and credits, and sent Price a check for the remaining $141,581.83. ( Id. ). While the record is less detailed on this point, it seems that Price also submitted a claim under his MPCI policy relating to the same alleged wind damage. (Docs. # 7-13, 7-15, 7-16 and 7-17). Correspondence between Reid and AgriLogic indicates that this claim was resolved on August 22, 2013, when Price received a check for $59,376. (Doc. # 7-13).
On January 8, 2014, Price filed a Complaint in Mason County Circuit Court, asserting claims for breach of contract, bad faith, slander and punitive damages. (Doc. # 1-1). Because AgriLogic paid Price's claims under the tobacco and MPCI policies, this Complaint is specific to AgriLogic's handling of his claim under the corn policy. ( Id. ). AgriLogic removed this action to federal court on January 28, 2014. (Doc. # 1).
1. Applicable Law
Federal courts sitting in diversity apply federal procedural law. Hanna v. Plumer, 380 U.S. 460, 465, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). The substantive law of the forum state governs the claims asserted. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Moore v. Coffey, 992 F.2d 1439 (6th Cir. 1993); Gafford v. Gen. Elec. Co., 997 F.2d 150, 165 (6th Cir. 1993). Accordingly, the Court will evaluate AgriLogic's Motion in accordance with the Federal Rules of Civil Procedure and apply substantive Kentucky law to Price's breach of contract and bad faith claims.
2. Standard of Review
AgriLogic has filed a Motion to Dismiss for Failure to State a Claim that presents matters outside the pleadings for the Court's consideration. (Doc. # 6). In such situations, the Federal Rules of Civil Procedure require the motion to dismiss to be construed as a motion for summary judgment. Fed.R.Civ.P. 12(d). Accordingly, the Court will look to the rules governing summary judgment in evaluating AgriLogic's Motion. Fed.R.Civ.P. 56(a).
Summary judgment is appropriate when 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). If there is a dispute over facts that might affect the outcome of the case under governing law, then entry of summary judgment is precluded. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party has the ultimate burden of persuading the court that there are no disputed material facts and that he is entitled to judgment as a matter of law. Id. Once a party files a properly supported motion for summary judgment by either affirmatively negating an essential element of the non-moving party's claim or establishing an affirmative defense, " the adverse party must set forth specific facts showing that there is a genuine issue for trial." Id. at 250. " The mere ...