United States District Court, W.D. Kentucky, Louisville Division
MEMORANDUM OPINION AND ORDER
N. Stivers, Judge United States District Court
matter is before the Court on Plaintiff's Motion for
Declaratory Judgment (DN 19) and Defendant's Motion for
Declaratory Judgement (DN 20). For the reasons outlined
below, Plaintiff's motion is DENIED, and
Defendant's motion is GRANTED.
STATEMENT OF FACTS AND CLAIMS
September 8, 2014, Plaintiff Stephanie Ray
(“Plaintiff”) was injured in an automobile
collision caused by Pete Mayfield (“Mayfield”) in
Elizabethtown, Kentucky. (Compl. ¶¶ 3, 6-7, DN
1-1). Mayfield's insurance provider, State Farm Mutual
Automobile Insurance Company (“State Farm”),
offered to pay Plaintiff $50, 000 to settle her claim and
$50, 000 to Plaintiff's husband to settle his derivative
loss of consortium claim, which together represented the
total liability policy limit of $100, 000. (Compl. ¶ 7;
Def.'s Mem. Supp. Mot. Summ. J. 2, DN 20-1 [hereinafter
Def.'s Mem.]). Plaintiff contends that Mayfield was an
“underinsured driver, ” as his policy with State
Farm was insufficient to adequately compensate Plaintiff for
her damages. (Compl. ¶ 8).
time of the accident, Plaintiff held an insurance policy
(“Policy”) issued by Defendant Encompass
Indemnity Company (“Defendant”) which provided
underinsured motorist (“UIM”) benefits. (Compl.
¶ 11; (Def.'s Mem. 2; Def.'s Mem Supp. Mot.
Summ. J. Ex. 1, DN 20-2 [hereinafter Policy]). In relevant part,
the Policy provided that Defendant “will reduce total
damages to any covered person by any amount available to that
covered person, under any bodily injury liability bonds or
policies applicable to the underinsured motor vehicle, that
the covered person did not recover as a result of a
settlement between that covered person and the insurer of any
underinsured motor vehicle.” (Policy 4 (emphasis
deleted)). The Policy further stated that Defendant
“will not make duplicate payment under this coverage
for any element of loss for which payment has been made by or
on behalf of persons or organizations who may be legally
responsible.” (Policy 4).
to KRS 304.39-320 and Coots v. Allstate Insurance
Co., 853 S.W.2d 895 (Ky. 1993), Plaintiff's counsel
sent a letter informing Defendant of the settlement offer and
its terms. (Compl. ¶ 9; Def.'s Mem. 2). Defendant
failed to respond within 30 days to advance Mayfield's
policy limits and reserve its subrogation claims against
State Farm and Mayfield. (Compl. ¶ 9; Def.'s Mem.
3). Thereafter, Defendant informed Plaintiff's counsel
that it did not intend to advance the policy limits and
consented to the settlement, but later sent a letter offering
settlement on terms inconsistent with those previously
disclosed. (Compl. ¶ 9).
then filed suit in Hardin Circuit Court, stating claims
against Defendant for UIM benefits and breach of contract.
(Compl. ¶¶ 10-17). Defendant removed the action to
this Court. (Notice Removal, DN 1). The parties have agreed
to resolve the legal dispute over the amount of credit for
liability coverage that Defendant could “set off”
against Plaintiff's UIM benefits claim. (Agreed Order, DN
18; Pl.'s Br. 1, DN 19 [hereinafter Pl.'s Mem.];
Def.'s Mem. 3). Plaintiff contends this amount is $50,
000, as received by her in her settlement with State Farm;
Defendant argues it is entitled, both under the plain
language of the Policy and Kentucky law, to set off the full
amount of Mayfield's $100, 000 liability policy limit.
(Pl.'s Mem. 1; Def.'s Mem. 1-2).
Court has subject matter jurisdiction under 28 U.S.C. §
1441(a), as a civil action originally brought in a state
court of which the district courts of the United States have
original jurisdiction, under 28 U.S.C. § 1332(a) because
there is diversity of citizenship between the parties and the
amount in controversy exceeds $75, 000, exclusive of interest
and costs, and as the Defendant removed the action to this
Court, as the district court of the United States for the
district and division embracing the place where the state
court action was pending.
the Declaratory Judgment Act, 28 U.S.C. § 2201(a),
“any court of the United States, upon the filing of an
appropriate pleading, may declare the rights and other legal
relations of any interested party seeking such declaration,
whether or not further relief is or could be sought.”
Exercise of jurisdiction under the Declaratory Judgment Act
is discretionary, not mandatory. Bituminous Cas. Corp. v.
J & L Lumber Co., Inc., 373 F.3d 807, 812 (6th Cir.
2004) (citing Brillhart v. Excess Ins. Co. of Am.,
316 U.S. 491, 494 (1942)).
Court considers five factors to determine whether it should
exercise jurisdiction over a request for a declaratory
judgment. Grand Trunk W. R.R. Co. v. Consol. Rail
Corp., 746 F.2d 323, 326 (6th Cir. 1984);
Bituminous, 373 F.3d at 812-13 (citing
Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 967
(6th Cir. 2000)). Neither party challenges this Court's
exercise of jurisdiction to issue a declaratory judgment and,
on balance, the factors weigh in favor of the Court's
exercising jurisdiction. See Bays v. Summitt Trucking,
LLC, 691 F.Supp.2d 725, 735 n.3 (W.D. Ky. 2010).
Therefore, the Court will determine Defendant's
argues that it is entitled, both under the plain language of
the Policy and Kentucky law, to set off the full amount of
Mayfield's $100, 000 liability policy limit against
Plaintiff's UIM benefits claim, regardless of
Plaintiff's unilateral attempt to set the value of her
settlement at $50, 000. (Def.'s Mem. 1-2). Plaintiff
contends that where the tortfeasor's liability limits
are, in fact, exhausted because of multiple claimants, the
UIM carrier is credited for the amount paid by the liability
carrier to the individual claimant, not the entire liability
limit split between multiple claimants. (Pl.'s Mem. 2).
review the parties' cross motions for declaratory
judgment, the interpretation of the insurance policy is a
question of law to be enforced under Kentucky law as written,
with clear and unambiguous terms given their ordinary
meaning. Erie R.R. Co. v. Tompkins, 304 U.S. 64,
78-79 (1938); K.M.R. Foremost Ins. Grp., 171 S.W.3d
751, 752 (Ky. App. 2005); Goodman v. Horace Mann Ins.
Co., 100 S.W.3d 769, 772 (Ky. App. 2003). KRS 304.39-320
requires that insurers make UIM coverage available to their
insureds, providing coverage in instances when the insured
sustains damages beyond the tortfeasor's liability
limits. In construing and applying a statute, the
Court's “duty is to ascertain and give effect to
the intent of the Legislature.” Steward v. ELCO
Admin. Servs., Inc., 313 S.W.3d 117, 121 (Ky. App. 2010)
(internal quotation marks omitted) (quoting Beckham v.
Bd. of Educ. of Jefferson Cty., 873 S.W.2d 575, 577 (Ky.
1994)). “To ...