REVIEW FROM COURT OF APPEALS CASE NO. 2015-CA-001788 OLDHAM
CIRCUIT COURT NO. 13-CI-00688
COUNSEL FOR APPELLANTS: Joseph E. Conley, Jr. BUECHEL &
COUNSEL FOR APPELLEE: Kenneth Allen Bohnert Bradley Robert
Palmer CONLIFFE, SANDMANN & SULLIVAN
OPINION OF THE COURT
and Procedural Background
December 2, 2010, the Energy and Environmental Cabinet's
Environmental Response Branch responded to a leak of
approximately 1, 000 gallons of #2 Fuel Oil (i.e. home
heating oil) from a faulty underground storage tank at an
unoccupied property Owned by the Martha Magel Estate. The
heating oil flowed downhill from the Estate's property
and flooded the nearby residence of Appellants, Cindy and Jim
Muncie. Although Appellee Patricia Wiesemann, the testatrix
of the Martha Magel Estate, hired contractors to remove the
heating oil and prevent further contamination, the leaking
continued to damage the property.
December 2 onward, heating oil continued to leak onto the
Muncies' property. The sump pump failed on December 8,
and extensive damage to the basement, driveway, and lawn of
the Muncie residence ensued. The continued contamination
caused the Environmental Response Branch to request on
January 13, 2011, that an environmental emergency be
declared. The agency then implemented emergency procedures to
"limit any human health or environmental impacts"
at the Muncie residence.
of 2011, Auto-Owners Insurance Company, Wiesemann's
liability insurer, filed an Interpleader complaint in federal
court against Wiesemann, the Muncies, the Dunkles, Shield
Environmental Associates, Inc. ("Shield"), and the
Kentucky Department for Environmental Protection
(specifically, the Environmental Response Team and the
Division of Waste Management, Superfund Branch).
September of 2013, the parties in the federal action entered
into the Partial Settlement and Partial Release Agreement.
Auto-Owners discharged its obligation to resolve third-party
claims by paying settlements for damages and environmental
cleanup costs. Notably, the settlement allocated $60, 000 to
the Muncies for repair costs, intended to remedy actual
damages to their property. Additionally, the. Muncies agreed
to dismiss all claims against Wiesemann, the Magel Estate,
and Shield, except for a few reserved claims. Prominently,
the partial settlement reserved "claims by the Muncies
asserting the diminution of the value of their real estate
due to the stigma resulting from the contamination . . .
." Partial Settlement and Partial Release Agreement at
month later, the Muncies filed the underlying state claim in
Oldham Circuit Court against Wiesemann and Shield for
negligence, trespass, and permanent nuisance. In May of 2015,
-Wiesemann filed a motion for summary judgment, arguing that
the partial settlement barred the state action because the
Muncies were fully compensated for the actual damages the
contamination caused to their property. Citing Smith v.
Carbide & Chems. Corp., 226 S.W.3d 52 (Ky.
2007), Wiesemann argued that, as a matter of law, stigma
damages can only be recovered when paired with an actual
its October 16, 2015 hearing, the Oldham Circuit held that,
while stigma damages may be considered in the measure of
actual damages for remediation, the Muncies could not seek
both the costs of remediation (i.e. the repair costs) and the
diminution in value due to stigma damages. Because the
Muncies settled their remediation claim in the partial
settlement agreement, the trial court held that no further
claim existed. Thus, the Muncies' claim for; stigma
damages was dismissed. The Muncies appealed to the Court of
Appeals of Kentucky.
appeal, the Muncies argued that: (1) stigma damages resulting
from the diminution in value of real property are recoverable
where there is actual damage; and (2) remediation for actual
damages is not a bar to recovery of stigma damages. While the
Court of Appeals agreed that "when there is actual
damage to real property, stigma or reputation damages may be
included as a measure of damages . . . [however, ] there is
not an independent right of recovery available for ...