matter is before the court on a motion for summary judgment
(DN 25) filed by Defendant Property and Casualty Insurance
Company of Hartford (“Hartford”). Hartford
contends that the breach of contract and negligence claims
asserted by Plaintiffs Richard Lackey and Darlene Lackey
(“Plaintiffs”) are time-barred under the
applicable insurance policy. Plaintiffs filed a response (DN
32), and Hartford filed a reply (DN 36). The motion is ripe
for review. For the following reasons, the Court will
grant in part and deny in
part Hartford's motion for summary judgment.
a married couple, own a residence located at 7 Harrods
Landing in Prospect, Kentucky. (DN 1-2 at 5 (Complaint).)
Plaintiffs were away from the residence between July and
September 2010, during which time a water pipe or hose in the
residence broke, causing extensive flooding, water damage,
and mold. (Id.) At the time of the flooding,
Plaintiffs had in effect an insurance policy issued by
Hartford, insuring the residence and its contents.
(Id.; DN 25-1 (motion for summary judgment)
(“The Policy provided dwelling, personal property, and
loss of use coverage for the Plaintiffs' residence . . .
.”).) The effective dates of the policy were March 27,
2010 to March 27, 2011. (DN 25-1 at 1.) When Plaintiffs
returned to their home, they discovered the damage and, on
September 12, 2010, submitted a claim to Hartford. (DN 1-2 at
5; DN 25-1 at 2.) Plaintiffs describe Hartford's response
as “an attempted repair and decontamination of the
property, ” but they allege that Hartford failed to
remove a water-damaged wet bar containing standing water, and
also failed to remove certain contaminated items from the
residence, instead packing the items in cardboard boxes and
leaving them inside the residence, resulting in damage to
Plaintiffs' real and personal property in an amount in
excess of the limits of the policy. (DN 1-2 at 5-6.)
Plaintiffs attempted to return to their residence in
approximately June 2012, at which time they discovered
failure to repair and decontaminate and/or
cross-contamination caused by Hartford. (Id. at 6.)
They allege that they were forced to vacate again and further
deprived of use and enjoyment of their real and personal
property. (Id.) Plaintiffs assert that their
residence remains uninhabitable. (Id.)
March 6, 2015, Plaintiffs filed suit against Hartford in
Jefferson (Kentucky) Circuit Court. (DN 1-2.) They allege the
following causes of action: (A) breach of contract based on
Hartford's negligent performance of or failure to perform
its duties under the insurance policy; (B) breach of the
covenant of good faith and fair dealing; (C) violation of KRS
304.12-230, Kentucky's Unfair Claims Settlement Practices
Act (“UCSPA”), in relation to Hartford's
failure to attempt in good faith to promptly settle the
issues underlying this action; and (D) negligence by Hartford
in its efforts to repair and decontaminate the residence.
(Id. at 6-10.) On April 1, 2015, Hartford removed
this case to this Court. (DN 1.) In June 2015, the parties
consented to United States Magistrate Judge jurisdiction. (DN
10.) On September 16, 2015, the Court granted Hartford's
motion to bifurcate this action for purposes of discovery and
trial. (DN 19.) Specifically, the Court stayed
Plaintiffs' bad faith claim, Count C, alleging violations
of the UCSPA, for purposes of discovery and trial.
has now moved for summary judgment as to Counts A and D of
the complaint. Hartford asserts that it has paid
approximately $124, 486 directly to Plaintiffs or to vendors
in effort to “clean, repair and/or replace the damage
to their home and personal property.” (DN 25-1 at 2-3.)
It paid an additional $40, 000 to cover Plaintiffs'
living expenses during the time that they did not reside in
their residence. (Id. at 2.) Hartford's position
as to the merits of Plaintiffs' claims is that all of
Plaintiffs' compensable losses have been fully paid.
(Id.) In its motion for summary judgment, Hartford
asserts that Plaintiffs' breach of contract and
negligence claims were not timely filed. It says that those
claims, filed in March 2015, approximately four-and-a-half
years after the September 12, 2010 date of loss, are barred
as a matter of law for failure to comply with the
policy's provision establishing a two-year limitations
period for filing lawsuits. (See generally DN 25-1.)
The relevant part of the policy provides as follows:
G. Suits Against Us
No action can be brought against us unless there has been
full compliance with all of the terms under Section I of
this policy and the action is started within two years
after the date of loss.
(DN 25-2 at 64, ¶ G.) Hartford contends that the
two-year limitations period is applicable to this lawsuit
and that it is enforceable under Kentucky law. (DN 25-1.)
argue in response that any limitation period that begins
counting from the date of loss rather than “the event
necessary to create the cause of action is counter to years
of Kentucky law, and is void and unenforceable under KRS
304.10-370.” (DN 32 at 4.) Plaintiffs contend that
for purposes of breach of contract actions, a claim does
not accrue until the date when the contract is breached,
which, in this case, occurred at as of July 23, 2014 at the
earliest. (Id. at 5.) Plaintiffs describe this as
the date on which, after several years of
“investigations, requests, studies, and estimates,
with Hartford paying various claims along the way, ”
with a letter to Plaintiffs' counsel, Hartford denied
Plaintiffs' proposals for a remediation protocol and
restoration bid. (Id.) In its reply, Hartford
argues that relevant case law actually supports its
calculation of the accrual date for the breach of contract
claim. (DN 36.) Hartford urges the Court to grant it
summary judgment as to Count A, breach of contract, and
Count D, negligence.
Court has subject-matter jurisdiction of this matter based
upon diversity jurisdiction. See 28 U.S.C. §
1332; see also DN 40.
ruling on a motion for summary judgment, the Court must
determine whether there is any genuine issue of material
fact that would preclude entry of judgment for the moving
party as a matter of law. Fed.R.Civ.P. 56(a). The moving
party bears the initial burden of stating the basis for the
motion and identifying evidence in the record that
demonstrates an absence of a genuine issue of material
fact. See Celotex Corp. v. Catrett, 477 U.S. 317,
322 (1986). If the moving party satisfies the burden, the
non-moving party must then produce specific evidence
proving the existence of a genuine issue of fact for trial.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
the Court must view the evidence in the light most
favorable to the non-moving party, the non-moving party
must do more than merely show the existence of some
“metaphysical doubt as to the material facts.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586 (1986) (citation omitted). Rather, the
non-moving party must present specific facts proving that a
genuine factual issue exists by “citing to particular
parts of the materials in the record” or by
“showing that the materials cited do not establish
the absence . . . of a genuine dispute.” Fed.R.Civ.P.
56(c)(1). “The mere existence of evidence in support
of the [non-moving party's] position will be
insufficient; there must be evidence on which the jury
could reasonably find for the [non-moving party].”
Anderson, 477 U.S. at 252.
while the substantive law of Kentucky is applicable to his
case pursuant to Erie R.R. v. Tompkins, 304 U.S.
64 (1938), a federal court sitting in diversity applies the
standards of Rule 56 of the Federal Rules of Civil
Procedure, not “Kentucky's summary judgment
standard as expressed in Steelvest, Inc. v. Scansteel
Serv. Ctr., Inc., 807 S.W.2d 476 (Ky. 1991).”
Gafford v. Gen. Elec. Co., 997 F.2d 150, 165 (6th
Cir. 1993), abrogated on other grounds by Hertz Corp.
v. Friend, 559 U.S 77 (2010).
moves for summary judgment on the basis that
Plaintiffs' breach of contract and negligence claims,
Counts A and D of the complaint, respectively, are barred
by the insurance policy's contractual limitation
period. (See generally DN 25-1.) Again, the policy
issued by Hartford to Plaintiffs provides that legal action
may be initiated against Hartford only if “the action
is started within two years after the date of loss.”
(DN 25-2 at 64, ¶ G.) It is undisputed that Plaintiffs
filed suit on March 6, 2015. That date was approximately
four-and-a-half years after the September 12, 2010 date of
loss, that is, the date on which Plaintiffs discovered the
water damage after being away from the residence between
July 2010 and September 12, 2010. Hartford contends that
Kentucky law, as applied by both Kentucky courts and
federal courts in the Sixth Circuit, supports its position.
on the other hand, argue that their cause of action for
breach of contract did not accrue until the actual breach
of contract occurred. They insist that the breach itself
did not take place until Hartford refused, by letter to
Plaintiffs' counsel dated July 23, 2014, “to make
the necessary remediation and repairs required by the
contract.” (DN 32 at 8.) In reply, Hartford argues
that the case law upon which Plaintiffs rely is factually
distinguishable; that the July 23, 2014 letter from
Hartford to Plaintiffs' counsel was a response to a
settlement demand made by Plaintiffs, not a denial of their
claim under the insurance contract; and that the two-year
contractual limitations period is valid under Kentucky law.
(See DN 36.)
law allows for contractual provisions which limit the time
in which an insured may file suit. Howard v. Allstate
Ins. Co., 2014 U.S. Dist. LEXIS 156895, *9 (E.D. Ky.
Nov. 5, 2014) (citing Edmondson v. Pa. Nat'l Mut.
Cas. Ins. Co., 781 S.W.2d 753, 756 (Ky. 1989));
see also Webb v. Ky. Farm Bureau Ins. Co., 577
S.W.2d 17 (Ky. Ct. App. 1978) (holding that a policy
provision limiting time to file suit against insurer to one
year after inception of insured's loss was enforceable
and not against public policy). In Webb, the
Kentucky Court of Appeals rejected the insured's
argument that the one-year limitation period was in
conflict with Kentucky's fifteen-year statutory
limitations period for contract-based claims. Id.
at 17-19. “In reaching this conclusion, the Kentucky
court cited a litany of Kentucky decisions enforcing the
reasonable shortening of the statutory period as consistent
with the public interest.” Brantley v. Safeco
Ins. Co. of Am., 2012 U.S. Dist. LEXIS 148411, *9
(W.D. Ky. Oct. 16, 2012) (citing Webb, 577 S.W.2d
at 19 (and cases cited)). “Since Webb, both
Kentucky courts and the federal courts of the Sixth Circuit
that have had the opportunity to apply Kentucky law have
consistently upheld the enforceability of insurance policy
provisions that limit the time for bringing suit against
the insurer to one year after the inception of the
loss.” Id. at *9-10 (and cases cited).
Kentucky statute, KRS 304.14-370, “specifically
allows foreign insurers to limit the time in which an
action can be brought against them.” Howard,
2014 U.S. Dist. LEXIS 156895 at *9-10; id. at *10
n.4 (citing KRS 304.1-070) (“A ‘foreign'
insurer is an insurer formed under the laws of a state
other than Kentucky.”) Specifically, the statute
provides as follows:
No conditions, stipulations, or agreements in a contract of
insurance shall deprive the courts of this state of
jurisdiction of actions against foreign insurers, or
limit the time for commencing actions against such insurers
to a period of less than one (1) year from the time when
the cause of action accrues.
KRS 304.14-370 (emphasis added).
the Eastern District of Kentucky has stated,
“[c]ontractual limitations periods generally set the
date of loss as the beginning of the limitations period
provided under the contract.” Howard, 2014
U.S. Dist. LEXIS 156895 at *10. Moreover, district courts
in the Sixth Circuit applying Kentucky law have concluded
that “the date of loss is not synonymous with the
date of accrual.” Id. (quoting Price v.
AgriLogic Ins. Servs., LLC, 2014 U.S. Dist. LEXIS
109448, *5 (E.D. Ky. Aug. 7, 2014)). “A claim cannot
accrue prior to the last event necessary to create the
cause of action occurring.” Id. (citing
Combs v. Int'l Ins. Co., 354 F.3d 568, 591
(6th Cir. 2004) (“Legal rights and obligations vest
when the last event necessary to create the cause of action
occurs.”)). Thus, to be valid under KRS 304.14-370,
“a limitations period under KRS 304.14-370 must
provide a party one year to bring suit from the accrual
date of the action, whichmay vary between
claims brought in a single suit.” Id.
at *11 (emphasis added).
this case, Hartford argues that the date of loss and the
accrual date for Plaintiffs' breach of contract claim
are one and the same. Plaintiffs argue that the accrual
date for the breach of contract claim was not until July
23, 2014, when Hartford communicated to Plaintiffs'
counsel that it would not agree to the “remediation
protocol and restoration bid” submitted by
Plaintiffs. (DN 32 at 5.) The Court will review two cases
that illuminate the proper resolution of those two
Brantley, a 2012 decision from this district, the
plaintiff-insured submitted a claim under a “landlord
protection policy” after a severe thunderstorm
allegedly caused damage to a rental property that he owned.
Brantley, 2012 U.S. Dist. LEXIS 148411 at *2. The
storm occurred on June 11, 2009. Id. On July 1,
2009, defendant notified plaintiff in writing that his
claim was denied on the basis that it was not a covered
loss, describing its investigation of the premises and
referencing the “relevant policy provisions it relied
upon to conclude that the damage was not the result of a
covered peril.” Id. at *2-3. On June 22,
2010, plaintiff, through counsel, requested that defendant
reevaluate his claim, submitting photographs that he
claimed showed additional damage caused by the storm.
Id. at *3. Defendant commissioned a civil
engineer, who inspected the property and, on August 30,
2010, submitted a report cosigned by another civil
engineer. Id. On September 16, 2010, plaintiff
filed a complaint in state court alleging breach of the
insurance contract, bad faith, and violations of the UCSPA.
Id. The case was removed to this Court on
diversity grounds; as in this case, the Court later granted
defendant's motion to bifurcate the matter into two
separate proceedings, one as to the breach of contract
claim and one as to the bad faith claims. Id.
After the parties engaged in some written discovery and
took certain depositions, defendant moved for summary
judgment. Id. at *4-5.
laying out the development of the law on contractual
limitations periods as is set forth above and rejecting an
argument by plaintiff that a Kentucky administrative
regulation precluded the enforcement of the one-year
limitation provision, the Brantley court granted
summary judgment to defendant on the issue of whether the
breach of contract claim was time-barred.
Brantley, 2012 U.S. Dist. LEXIS 148411 at *8-12.
The Court noted that the date of loss was in June 2009, but
plaintiff did not commence suit until over one year later
in September 2010. Id. at *12-13. Accordingly,
“the Court [found] that under established Kentucky
law the one-year contractual limitation provision in the
policy is both reasonable and enforceable, and [d]efendant
[was] entitled to summary judgment because
[p]laintiff's claim [was] time-barred by the applicable
one-year policy limitation.” Id. at *13.
This was so despite the fact that defendant's
reevaluation of plaintiff's insurance claim was
completed approximately one year and two months after the
date of loss.
2014 case from the Eastern District of Kentucky,
Collins v. State Farm Fire & Cas. Co., 2014
U.S. Dist. LEXIS 173065 (E.D. Ky. Dec. 15, 2014), a fire
damaged plaintiff's residence on May 20, 2012.
Plaintiff's residence was covered by an insurance
policy covering fire loss. Id. at *1. By letter
dated March 12, 2013, defendant denied coverage, declaring
the policy void and denying the claim “due to
[plaintiff's] violation of the intentional acts and
concealment or fraud provisions of the residential
policy.” Id. The parties did not dispute
that the fire was intentionally set, but at the time of the
court's memorandum opinion and order on summary
judgment, the identity of the perpetrator had not been
established. Id. at *1-2. On September 27, 2013,
approximately one-and-a-half years after the fire,
plaintiff filed suit in Kentucky state court; the case was
later removed to the Eastern District of Kentucky.
Id. at 2. Defendant moved for summary judgment on
the basis that the breach of contract claim was time-barred
under the insurance contract's one-year limitations
period, which was calculated from the date of loss or
damage. Id. at *3.
court noted that under KRS 304.14-370, foreign insurers may
limit the time for commencing a suit by contract, so long
as the period is not less than one year from the time when
the cause of action accrues. Collins, 2014 U.S.
Dist. LEXIS 173065 at *3 (quoting KRS 304.14-370). The
court further noted that “[t]here is an obvious
tension between the contract's provision, which uses
the date of loss or damage as the beginning of the
limitations period, and KRS 304.14-370, which uses the date
that the action accrued.” Id.
“Nonetheless, ” the court went on, “the
Sixth Circuit has held that a one year limitations period
following the date of ‘loss or damage' is
reasonable and consistent with KRS 304.14-370, where the
underlying claim arose from a fire loss.”
Id. at *3-4 (citing Smith v. Allstate Ins.
Co., 403 F.3d 401, 405 (6th Cir. 2005) (“Under
Kentucky law, it appears, a cause of action for breach of
an insurance contract may ‘accrue, ' in some
sense, before the claimant is entitled to sue.”))
(additional citations omitted). In Collins,
plaintiff argued that the one-year limitations period was
unreasonable because by the time defendant formally denied
her claim, only 68 days remained in the one-year
contractual period between the date of loss and her
deadline to file a lawsuit. Id. at *4. She further
argued that she did nothing to delay the investigation of
her claim and that she had no way of knowing it would be
denied until she received the denial letter. Id.
Defendant -- and, ultimately, the court --disagreed, noting
that within approximately two weeks of the fire, plaintiff
signed a form acknowledging the existence of a question
regarding whether the fire was accidental in nature and
that defendant may have no obligation to defend or
indemnify her. Id. at *5. The court concluded that
due to the nature of the loss, plaintiff was able to
ascertain her rights under the policy on the date of the
loss or soon thereafter, and that she failed to establish
that the time period in issue was unreasonable.
Id. at *5-6 (and cases cited).
Court finds both Brantley and Collins
instructive in this case. In both cases, the courts
rejected arguments by plaintiffs that one-year contractual
limitations periods were unreasonable due to the particular
sequence of events surrounding the denials of their
insurance claims. In this case, it is undisputed that
four-and-a-half years elapsed between the date of loss and
the filing of the original complaint in state court. This
is more than twice the two-year contractual limitation
provision in the policy. Kentucky statute, Kentucky courts,
and federal courts applying Kentucky law have approved
one-year limitations periods, whereas the insurance
contract at issue in this case offered Plaintiffs twice
that length of time to file suit. Guided by relevant case
law, including Brantley and Collins, the
Court is not persuaded that the breach of contract claim
accrued at a date later than the date of loss, such as the
June 2014 date cited by Plaintiffs. Based upon the series
of events set forth in the complaint and Plaintiffs'
response to the summary judgment motion, the Court is
inclined to view the June 2014 letter more similarly to
Hartford's description of it, that is, as a letter
regarding informal settlement negotiations, rather than a
formal denial of claim, as it is described by Plaintiffs.
The June 2014 letter does not constitute a belated, full
denial of Plaintiffs' claim, as Plaintiffs seem to
suggest. After all, Hartford did pay out a significant sum
of money directly to Plaintiffs and to third-parties
engaged to repair Plaintiffs' residence. Moreover, the
Court is struck by the fact that Plaintiffs' discovery
in “approximately June 2012” of ...