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Employers Mutual Casualty Co. v. SG&D Ventures, LLC

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

July 19, 2017

EMPLOYERS MUTUAL CASUALTY COMPANY PLAINTIFF
v.
SG&D VENTURES, LLC DEFENDANT

          MEMORANDUM OPINION

          Charles R. Simpson III, Senior Judge

         I. Introduction

         This matter is before the Court on the motion of Plaintiff Employers Mutual Casualty Company (“Employers Mutual”) to bifurcate trial under Federal Rule of Civil Procedure 42 and to hold the discovery of bad faith issues in abeyance, ECF No. 10. Defendant SG&D Ventures, LLC (SG&D) responded, ECF No. 12. Employers Mutual replied, ECF No. 15. The Court will grant Employers Mutual's motion to bifurcate trial and to hold the discovery of bad faith issues in abeyance pending the resolution of the underlying declaratory judgment claim and contract counterclaims.

         II. Background

         A. Allegations in the Complaint

         SG&D maintained an insurance policy issued by Employers Mutual (“the policy”). Policy 1, ECF No. 1-3. According to the complaint, SG&D submitted a notice of an insurance claim to Employers Mutual under the policy for property damage suffered by eight SG&D properties in Louisville, Kentucky. Compl. ¶ 4, ECF No. 1. The notice of claim asserted that a hail storm had damaged the properties' roofs, gutters, and HVAC systems. Id. ¶ 5. The date of loss was April 28, 2012, four and one-half years before the notice of claim was sent to Employers Mutual. Id. ¶ 6. SG&D requested that Employers Mutual pay $290, 865.23 to repair the damage to the properties. Id. ¶ 7.

         On October 11, 2016, Employers Mutual and SG&D agreed that Employer Mutual's investigating the claim would not waive or invalidate the terms or conditions of any insurance policy or the rights of the parties. Id. ¶ 8. That same day, Employers Mutual's agent, Julia Tilford, reviewed the properties. Id. ¶ 9.

         On December 21, 2016, SG&D's representative, Sean Garber, testified under oath about the insurance claim. Id. ¶ 10. He also produced the deed to the properties that showed that SG&D had acquired the properties between 2008 and 2010. Id. Garber affirmed that the properties' roofs began leaking in 2012, after the hail storm, and continued to leak through 2016. Id. ¶ 11. He attested that the leaks further damaged the properties' ceiling tiles, light fixtures, and sheet rock. Id. Garber also explained that SG&D employees and several independent contractors had tried unsuccessfully to repair the leaks in the roofs. Id. ¶ 12. While testifying, Garber recalled the hail storm that had occurred on April 28, 2012. Id. ¶ 13. His company, which occupies most of the properties, bought scrap metal that had been damaged in the hail storm and sold auto parts to companies repairing cars damaged in the hail storm. Id.

         Soon thereafter, Employers Mutual filed suit in this Court. Employers Mutual alleges that SG&D's claim for the damage to the properties caused by the hail storm is time barred under the terms of the policy (Count I). Id. ¶¶ 22-24. Employers Mutual further maintains that SG&D's failure to promptly provide notice of the insurance claim and to take reasonable steps to protect the properties from further damage bars any current claim by SG&D for the damage to the properties caused by the hailstorm (Count II). Id. ¶¶ 25-27. Employers Mutual also contends that the policy contains an exception for damage caused by:

“[W]ear and tear, rust or other corrosion, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself; continuous or repeated seepage or leakage of water, or the presence or condensation of humidity, moisture or vapor, that occurs over a period of 14 days or more; and neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.”

Id. ¶¶ 28-30. And because of this exception, Employers Mutual asserts that SG&D's claim for the damage to the properties is excluded from coverage under the policy (Count III). Id.

         Employers Mutual also contends that “to the extent that any of the Properties are covered by other insurance, and SG&D is determined to have an enforceable claim, ” the policy is required to pay only the excess of the amount that the other insurance claims will cover (Count IV). Id. ¶¶ 31-33. Finally, Employers Mutual reserves the right to deny any claims for any other reason or to assert any other conditions of the policy as a defense (Count V). Id. ¶¶ 34-35. Employers Mutual seeks an entry of declaratory judgment determining its duties to extend coverage to SG&D for any damages that are sought or that may be sought under the policy and for an award of costs. Id. at 8.

         B. SG&D's Counterclaims

         In response, SG&D filed an answer and counterclaims against Employers Mutual. Answer & Countercl. 1, ECF No. 5. Regarding its counterclaims, SG&D asserts that Employers Mutual breached the policy by failing to fully and promptly pay the amounts owed to it as a result of the loss, as required by the policy (Count I). Id. ¶¶ 22-26. SG&D also maintains that Employers Mutual's “refusal to pay the amounts contractually owed to [it] is arbitrary and capricious and constitutes bad faith” (Count II). Id. ¶¶ 27-31. Additionally, SG&D alleges that Employers Mutual violated the Unfair Claims Settlement Act, KRS § 304.12-230 (Count III), id. ¶¶ 32-33, and violated KRS § 304.12-235 by failing to make a good faith attempt to settle its claims (Count IV), id. ¶¶ 34-36. SG&D further maintains that Employers Mutual violated the Kentucky Consumer Protection Act, KRS § 367.110, et seq. by engaging in “unfair, false, misleading and/or deceptive ...


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