United States District Court, W.D. Kentucky, Louisville Division
MEMORANDUM OPINION AND ORDER
J. Hale, Judge United States District Court
October 2015, Plaintiff Anita Frasure purchased what she
believed to be a homeowners insurance policy from Defendant
State Farm Fire & Casualty Co. When her home was damaged
by a tornado the following May, Frasure filed a claim and
discovered that she had in fact been issued a renters policy.
As the policy did not cover property damage, State Farm
denied Frasure's claim. Frasure alleges that State
Farm's actions amount to fraudulent and negligent
misrepresentation. She also asserts three bad-faith claims:
violations of the Kentucky Unfair Claims Settlement Practices
Act and Kentucky Consumer Protection Act and breach of the
covenant of good faith and fair dealing. (Docket No. 1-1)
State Farm has moved to dismiss Frasure's bad-faith and
fraud claims, as well as her claim for punitive damages.
(D.N. 6) For the reasons discussed below, State Farm's
motion will be granted.
following facts are set forth in the complaint and taken as
true for purposes of the motion to dismiss. See Keys v.
Humana, Inc., 684 F.3d 605, 608 (6th Cir. 2012) (citing
Harbin-Bey v. Rutter, 420 F.3d 571, 575 (6th Cir.
contacted State Farm agent Mitchell Jackson's office in
2015 regarding a homeowners insurance policy for her mobile
home. (D.N. 1-1, PageID # 6) In a transaction conducted
entirely by telephone and fax, during which the only document
transmitted to Frasure was a blank signature sheet, she
purchased a policy. (Id., PageID # 7) After repeated
requests by Frasure, Jackson's office faxed a copy of the
policy declarations page to the holder of Frasure's
mortgage. (Id., PageID # 8) Frasure never received a
copy of the policy, and the mortgage holder failed to notice
that the policy was for renters insurance as opposed to
homeowners insurance. (Id.)
2016, a tornado caused wind, water, and hail damage to
Frasure's home. Frasure filed an insurance claim, which
State Farm denied on the ground that Frasure's policy did
not cover property damage. A complaint to the Kentucky
Department of Insurance went unresolved, and Frasure filed
suit in Breckinridge Circuit Court. (See D.N. 1-1,
PageID # 9) The action was removed to this Court. (D.N. 1)
The same day, State Farm filed its answer to the complaint
and the motion to dismiss at issue here. (D.N. 4, 6) State
Farm maintains that Counts One, Two, Three, and Five of
Frasure's complaint fail to state a claim upon which
relief may be granted.
survive a motion to dismiss for failure to state a claim,
“a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is
plausible on its face “when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. Factual allegations are
essential; “[t]hreadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do
not suffice, ” and the Court need not accept such
statements as true. Id. A complaint whose
“well-pleaded facts do not permit the court to infer
more than the mere possibility of misconduct” does not
satisfy the pleading requirements of Rule 8 and will not
withstand a motion to dismiss. Id. at 679.
Frasure's claims of bad faith and fraud do not meet this
standard, and without them, her claim for punitive damages
alleges bad faith under the Kentucky Unfair Claims Settlement
Practices Act (KUCSPA), Ky. Rev. Stat. § 304.12-230(9);
the Kentucky Consumer Protection Act (KCPA), Ky. Rev. Stat.
§ 367.170; and Kentucky common law. (See D.N.
1-1, PageID # 10-12) All three claims are governed by the
same three-factor test:
(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
State Auto Prop. & Cas. Ins. Co. v. Hargis, 785
F.3d 189, 197 (6th Cir. 2015) (quoting Wittmer
v. Jones, 864 S.W.2d 885, 890 (Ky. 1993)). The first
factor, obligation to pay, is not adequately pled here.
a contractual obligation, there simply is no bad faith cause
of action, either at common law or by statute.”
Davidson v. Am. Freightways, Inc., 25 S.W.3d 94, 100
(Ky. 2000). In this case, the complaint reveals no
contractual obligation to pay on State Farm's part, and
Frasure does not dispute that the renters policy imposes no
obligation on State Farm to pay her claim. (D.N. 7, PageID #
88) Instead, she argues that the Wittmer test is
inapplicable to the provision of the KUCSPA under which she
seeks relief. (See id., PageID # 86-88) That statute
provides that “[i]t is an unfair claims settlement
practice for any person to . . . [a]ttempt to settle claims
on the basis of an application which was altered without
notice to, or knowledge or consent of the ...