United States District Court, W.D. Kentucky, Louisville Division
THE CINCINNATI SPECIALTY UNDERWRITERS INSURANCE COMPANY, Petitioner/Counter Defendant,
C.F.L.P. 1, LLC, Respondent/Counter Claimant.
MEMORANDUM OPINION AND ORDER
J. HALE, JUDGE
The Cincinnati Specialty Underwriters Insurance Co. (CSU)
filed this action seeking appointment of an umpire to resolve
its insurance-coverage dispute with Respondent C.F.L.P. 1,
LLC, d/b/a Arcadia Apartments (Arcadia). (Docket No. 1) After
extensive briefing and argument, an umpire was appointed
(see D.N. 78; D.N. 101), and an appraisal award was
issued. (See D.N. 106) CSU has now moved for summary
judgment on Arcadia's remaining counterclaims of bad
faith, which were bifurcated from the appraisal dispute.
(D.N. 111; see D.N. 81) CSU's motion prompted
yet another flurry of briefs from Arcadia's counsel, who
sought a scheduling conference on the counterclaims and an
extension of the response deadline to allow for discovery
concerning CSU's alleged bad faith. (D.N. 112; D.N. 117)
Those motions were denied by Magistrate Judge Dave Whalin,
who concluded that Arcadia had failed to demonstrate a need
for discovery or a litigation schedule as to the
counterclaims. (D.N. 123) Arcadia has also moved for leave to
file a surreply in opposition to the summary-judgment motion.
(D.N. 121) For the reasons explained below, the motion for
leave to file a surreply will be denied, and CSU's motion
for summary judgment will be granted.
case arises out of a hail-damage claim submitted under a
commercial-property insurance policy CSU issued to Arcadia.
CSU paid $24, 522.25 on the claim to cover damage to siding
on some of Arcadia's buildings, but Arcadia maintained
that it was entitled to more. (D.N. 1, PageID # 2) To resolve
the dispute, CSU invoked the policy's appraisal
provision, which provides:
[E]ach party will select a competent and impartial appraiser.
The two appraisers will select an umpire. If they cannot
agree, either may request that selection be made by a judge
of a court having jurisdiction. The appraisers will state
separately the value of the property and amount of loss. If
they fail to agree, they will submit their differences to the
umpire. A decision agreed to by any two will be binding.
7-2, PageID # 23) CSU's appraiser, Marty Refka, appraised
the siding-damage loss at approximately $29, 000, while
Arcadia's appraiser, Richard Michelson, determined that
the loss was more than $1, 000, 000. (D.N. 7-1, PageID # 19)
Refka and Michelson were unable to agree on an umpire, and so
CSU filed this action petitioning the Court to appoint one.
(D.N. 1) CSU proposed three candidates for umpire, all of
whom Arcadia claimed were biased in favor of insurance
companies in general or CSU in particular. (See D.N.
23, PageID # 409-11) The Court rejected Acadia's
contention that a retired judge or other mediator would be
preferable, concluding that the policy contemplated an umpire
with appraisal experience. (See D.N. 78, PageID #
1475) The Court appointed CSU's third nominee, Jeff
Turley, based on Turley's “extensive experience
serving as an umpire” and Arcadia's failure to
offer specific objections concerning his supposed bias.
(Id., PageID # 1476) Shortly thereafter, Arcadia
moved to disqualify Turley on the ground that he had a
“pecuniary relationship with CSU.” (D.N. 82,
PageID # 1488) Following voir dire of Turley and supplemental
briefing on the issue (see D.N. 98), the Court
concluded that Turley was capable of serving as an impartial
umpire. (D.N. 101) The Court explained its decision as
During the March 16 conference, Turley stated that NCA
Group-which purchased his company, Turco, in 2013 and may
handle claims for [CSU]-is not his employer, does not limit
the parties for whom he may perform appraisals, and plays no
other role in selecting or approving his appraisal
assignments. His compensation is not tied to NCA Group, and
he would suffer no adverse consequences from NCA Group if he
ruled against CSU in this matter; nor does he have any other
interest, financial or otherwise, in the outcome of the
dispute between CSU and Arcadia. In short, the Court finds no
grounds to disqualify Turley.
(D.N. 101, PageID # 1657-58)
parties proceeded with the appraisal, and Turley issued an
appraisal award of $94, 326.05. (See D.N. 106) Refka
agreed with the award, thus rendering it binding under the
policy. (Id.; see D.N. 7-2, PageID # 23)
When the parties failed to agree to a final resolution of the
case (see D.N. 110), CSU moved for summary judgment
on Arcadia's remaining counterclaims. (D.N. 111) Arcadia
opposes the summary-judgment motion (D.N. 116) and also seeks
leave to file a surreply, purportedly to address issues
raised for the first time in CSU's reply. (D.N. 121) CSU
opposes Arcadia's request. (D.N. 122)
Court agrees with CSU that the proposed surreply neither
addresses a new argument nor adds anything of substance to
the parties' briefing. It thus will not be permitted. And
because Arcadia has failed to establish a genuine issue of
material fact as to its counterclaims, the Court will grant
CSU's motion for summary judgment.
judgment is required when the moving party shows, using
evidence in the record, “that there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56(a);
see 56(c)(1). For purposes of summary judgment, the
Court must view the evidence in the light most favorable to
the nonmoving party. Loyd v. Saint Joseph Mercy
Oakland, 766 F.3d 580, 588 (6th Cir. 2014) (citing
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986)). However, the Court “need consider only the
cited materials.” Fed.R.Civ.P. 56(c)(3); see Shreve
v. Franklin Cty., Ohio, 743 F.3d 126, 136 (6th Cir.
2014). If the nonmoving party “fails to properly
support an assertion of fact or fails to properly address
another party's assertion of fact as required by Rule
56(c), ” the fact may be treated as undisputed.
Fed.R.Civ.P. 56(e)(2)-(3). To survive a motion for summary
judgment, the nonmoving party must establish a genuine issue
of material fact with respect to each element of each of his
claims. Celotex Corp. v. Catrett, 477 U.S. 317,
argues that summary judgment is warranted here because there
is no evidence to support the allegations underlying
Arcadia's bad-faith claims. (D.N. 111-1, PageID #
1685-88) Counts II and III of Arcadia's counterclaim
allege bad faith under the Kentucky Unfair Claims Settlement
Practices Act and Kentucky common law, respectively. (D.N. 8,
PageID # 44-46) To prevail on either cause of action, Arcadia
must establish that (1) CSU “was obligated to pay the
claim”; (2) CSU “lacked a reasonable basis for
denying the claim”; and (3) CSU “knew that it
lacked a reasonable basis for denying the claim or acted with
reckless disregard for whether there was a reasonable basis
for denying the claim.” Cox v. Empire Fire &
Marine Ins. Co., 637 F. App'x 904, 907 (6th Cir.
2016) (citing Wittmer v. Jones, 864 S.W.2d 885, 890
(Ky. 1993)). “Kentucky's evidentiary standard is
high: a plaintiff must show that the ‘insurer has
engaged in outrageous conduct' and that this conduct was
‘driven by evil motives or by an indifference to its
insureds' rights.'” Id. (quoting
United Servs. Auto. Ass'n v. Bult, 183 S.W.3d
181, 186 (Ky. Ct. App. 2003)).
initial matter, CSU notes that it did not deny Arcadia's
hail-damage claim, but simply paid less than Arcadia thought
was appropriate. (D.N. 111-1, PageID # 1685-86) Arcadia does
not dispute this point; instead, it argues that CSU acted in
bad faith in connection with the appraisal process.
(See D.N. 116, PageID # 1710) Specifically, ...