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Frasure v. State Farm Fire & Casualty Co.

United States District Court, W.D. Kentucky, Louisville Division

March 1, 2017



          David J. Hale, Judge United States District Court

         In 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.

         I. BACKGROUND

         The 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. 2005)).

         Frasure 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.)

         In May 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.

         II. ANALYSIS

         To 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 likewise fails.

         A. Bad Faith

         Frasure 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 basis existed.

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.

         “Absent 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 ...

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