United States District Court, W.D. Kentucky, Louisville
Charles R. Simpson III, Senior Judge
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
Allegations in the Complaint
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.
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.
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.
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
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.
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.
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 ...