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Ensey v. Shelter General Insurance Co.

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

April 5, 2018

LISA S. ENSEY, AS PARENT and STATUTORY GUARDIAN ON BEHALF OF D.E., MINOR and KIMBERLY HUNT, AS LEGAL GUARDIAN ON BEHALF OF J.T., MINOR, PLAINTIFFS
v.
SHELTER GENERAL INSURANCE COMPANY and SHELTER MUTUAL INSURANCE COMPANY, DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          THOMAS B. RUSSELL, SENIOR JUDGE UNITED STATES DISTRICT COURT

         This matter is before the Court on Plaintiffs Lisa S. Ensey and Kimberly Hunt's, (“Plaintiffs”), Motion for Judgment on the Pleadings Pursuant to Federal Rules of Civil Procedure 12(c) and Motion for Execution of Money Judgment Pursuant to Federal Rules of Civil Procedure 69. [R. 10.] Defendants Shelter General Insurance Company and Shelter Mutual Insurance Company, (“Shelter”), responded, [R. 11], and Plaintiffs replied, [R. 12.] Fully briefed, this matter is now ripe for adjudication. For the reasons stated herein, Plaintiffs' Motion for Judgment on the Pleadings Pursuant to Federal Rules of Civil Procedure 12(c), [R. 10], is DENIED. Plaintiffs' Motion for Execution of Money Judgment Pursuant to Federal Rules of Civil Procedure 69 is DENIED.

         BACKGROUND

         On May 31, 2017, a jury in Jefferson Circuit Court awarded $2.5 million to D.E., a minor, and $1.5 million to J.T., a minor, against Carrie Blankenship for failure to comply with her duties as Director of Kidz University, Inc. to supervise students, supervise and train staff, and adhere to and comply with state rules and regulations “concerning child abuse prevention, training and reporting of actual and/or suspected child abuse, and said failure was a substantial factor in causing injury to both minors J.T. and D.E..” [R. 1-1 at 4 (Complaint); 13 (Judgment).] Before the trial, in a letter dated December 7, 2016, Shelter, carrier of Blankenship's homeowner's insurance policy, denied coverage to Blankenship under the policy and refused to defend her in the action against her in Jefferson Circuit Court. [Id. at 3-4.] On July 4, 2017, as well as on August 9, 2017, counsel for Plaintiffs demanded payment from Shelter under Blankenship's policy for the $4 million judgment. [Id. at 4.] Shelter still denied coverage and refused to pay. [Id.]

         Plaintiffs filed this action in Jefferson Circuit Court on September 15, 2017 to collect the $4 million judgment from Shelter. [Id.] Shelter removed the case to federal court on October 18, 2017. [R. 1.] On February 16, 2018, Plaintiffs filed the Motion for Judgment on the Pleadings and Motion for Execution of Money Judgment that is currently before the Court. [R. 10.]

         STANDARD

         “For purposes of a motion for judgment on the pleadings [under Rule 12(c) ], all well-pleaded material allegations of the pleadings of the opposing party must be taken as true, and the motion may be granted only if the moving party is nevertheless clearly entitled to judgment.” JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 581 (6th Cir. 2007) (quoting Southern Ohio Bank v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 479 F.2d 478, 480 (6th Cir. 1973)). However, the Court “need not accept as true legal conclusions or unwarranted factual inferences.” Id. at 581-82 (quoting Mixon v. Ohio, 193 F.3d 389, 400 (6th Cir. 1999)). “A Rule 12(c) motion ‘is granted when no material issue of fact exists and the party making the motion is entitled to judgment as a matter of law.' ” Id. at 582 (quoting Paskvan v. City of Cleveland Civil Serv. Comm'n, 946 F.2d 1233, 1235 (6th Cir. 1991)).

         DISCUSSION

         The crux of Plaintiffs argument is as follows:

If Defendants breached their duty to defend Carrie Blankenship then they have waived their ability to challenge coverage. They might also be estopped from doing so however redundant the consideration and analysis because the same fact pattern giving rise to estoppel in this case triggers waiver, namely, wrongfully denying coverage and failing to defend.

[R. 12 at 2 (Reply).] More specifically, Plaintiffs argue that Shelter has waived the right to argue coverage in this matter because “by breaching its duty to defend, Shelter waived any right to not only enforce a provision of the contract, but by logical extension, if no provision of the contract may be enforced, then in its entirely the contract may no longer be challenged or argued.” [Id. at 10.] Plaintiffs argue that Shelter is estopped from arguing coverage because if “the possibility or potentiality of coverage existed and Shelter was either reckless, negligent or intentional in denying coverage to Carrie Blankenship, then Shelter made a false representation, ” and, when Shelter denied coverage, “Blankenship detrimentally relied upon that denial by proceeding pro se and making poor and ill-advised decisions in her defense and in her negotiations and interactions with Plaintiffs' counsel.”[1] [Id. at 10-11.]

         As an initial matter, Plaintiffs have cited no case law in support of their theory for waiver or estoppel. In each instance, Plaintiffs mention the doctrine of waiver or estoppel and then boldly attempt to connect it to the allegation that Shelter breached a duty to defend. With regards to estoppel, Plaintiffs state the elements required to prove estoppel and then assert that if Shelter wrongly denied coverage it was a false representation. [See R. 12 at 3.] Plaintiffs provide no further, legitimate explanation or support in case law. In its argument for waiver, without stating the requirements of waiver, Plaintiffs claim that by allegedly breaching its duty to defend, Shelter waived the right to argue coverage under the insurance policy. [See id. at 10.] Again, Plaintiffs fail to give further explanation or support in case law. Nor can the Court can find legal support for either theory.

         Additionally, both theories of waiver and estoppel provided by Plaintiffs depend on whether Shelter breached its duty to defend by wrongfully denying coverage to Blankenship. Yet, Plaintiffs have not established that Shelter breached a duty to defend Blankenship. “Under Kentucky law, a court should determine at the outset of litigation whether an insurance company has a duty to defend its insured by comparing the allegations in the underlying complaint with the terms of the insurance policy.” Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 507 (6th Cir. 2003). “[A]n insurer has a duty to defend if there is any allegation which potentially, possibly or might come within the coverage terms of the insurance policy.” Cincinnati Ins. Co. v. Motorists Mut. Ins. Co., 306 S.W.3d 69, 79 (Ky. 2010) (quotation omitted).

         Throughout Plaintiffs' Motion for Judgment on the Pleadings and their Reply, Plaintiffs often assert that the negligence allegations of the First Amended Complaint are covered by Blankenship's policy. [See, e.g. R. 12 at 8 (“[t]here can simply be no disputing that the multiple negligence allegations of the First Amended Complaint potentially, possibly or might come within the coverage of Carrie Blankenship's Policy”).] However, Plaintiffs never cite to a specific term in the insurance policy with which the Court should compare an allegation in the underlying complaint. Plaintiffs come close by citing this district's findings in West American Insurance Company v. Embry to support the argument that the negligent acts of Blankenship qualify as an “accident” that would be covered under the policy. [R. 10 at 13.] However, upon closer examination, the portion quoted by Plaintiffs involved the court interpreting the holding of the Sixth Circuit in Westfield Insurance Co. v. Tech Dry, Inc., in which the Sixth Circuit held that “[w]hen a policy contains an exclusion for intentional acts by the insured, coverage must be provided ‘as long as the injury was not actually and subjectively intended' by the insured, ” and, therefore, “[s]ince a claim of negligent hiring does not allege intentional injury by the insured, it is not excluded under the policy.” W. Am., No. 3:04-CV-47-H, 2005 WL 1026185, at *2 (W.D. Ky. April 25, 2005) (Heyburn, J.) (quoting Westfield, 336 F.3d at 510). The court stated that “[l]ike negligent hiring of an employee, negligent supervision of a child would constitute an ‘occurrence' within the language of the policy here, thus requiring West American to defend and indemnify in the underlying action.” W. Am., No. CIV.A. 3:04CV-47-H, 2005 WL 1026185, at *2. Despite this statement, the court in West American went on to hold that the insurance company defendant was not required to defend the plaintiff due to a specific provision that excluded all claims of bodily injury “arising out of” the negligent ...


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