United States District Court, W.D. Kentucky, Louisville
Derquis N. VALDIVIA MERRERO, et al. PLAINTIFFS
SECURA INSURANCE DEFENDANT
CHARLES R. SIMPSON III, SENIOR JUDGE
case is before the Court on Defendant SECURA Insurance's
motion to stay the case pending resolution of a related state
case ongoing in Jefferson County Circuit Court. DN 17.
Plaintiffs have responded in opposition. DN 18. SECURA
replied. DN 19. Therefore, this matter is ripe for review.
Finding that liability against SECURA is premised on a
determination of liability against the state court
defendants, the Court will stay this case pending a
determination of liability there.
facts relevant to the pending motion are uncontroverted.
See generally DN 1; DN 17-1. On March 23, 2018, a
motor vehicle owned by Dixie Haulers Incorporated and driven
by James McFarland impacted a motor vehicle operated by
Derquis N. Valdivia Marrero, his wife Jenny Camejo-Diaz, and
his infant son, J.P.V.C. As a result, Plaintiffs allege they
received injuries. On September 13, 2018, Plaintiffs filed
suit in the Jefferson County Circuit Court asserting
negligence claims against Dixie Haulers and McFarland.
See Diaz v. McFarland, No. 18-CI-5342.
Plaintiffs filed this lawsuit against SECURA, Dixie Haulers,
and McFarland. Dixie Haulers and McFarland were voluntarily
dismissed, leaving only SECURA. The claims against SECURA
include breach of contract, contractual and tortious breach
of the implied covenant of good faith and fair dealing, bad
faith, unfair trade practices, intentional infliction of
emotional distress, negligent infliction of emotional
distress, racial discrimination in the making of a contract
(42 U.S.C. § 1981), and fraudulent misrepresentation. In
effect, Plaintiffs argue that SECURA has improperly and in
bad faith withheld insurance payments for their injuries.
issue revolves around whether Kentucky law requires a finding
of liability regarding the insureds before a plaintiff can
file a lawsuit against an insurer. All parties agree that the
Supreme Court of Kentucky has been clear about this issue in
the past, stating “Kentucky is not a ‘direct
action' jurisdiction.” State Auto. Mut. Ins.
Co. v. Empire Fire & Marine Ins. Co., 808 S.W.2d
805, 807-08 (Ky. 1991) (citing Cuppy v. Gen. Accident
Fire & Life Assur. Corp., 378 S.W.2d 629, 632 (Ky.
1964)). Therefore, in Kentucky, “an injured party must
first obtain judgment against the opposing party defendant
and then seek enforcement of the judgment rendered in an
action against the defendant's indemnitor.”
Id. at 808. Plaintiffs argue, however, that
Kentucky's Unfair Claims Settlement Practices Act
(“KUCSPA”), Ky. Rev. Stat. § 304.12-230 and
Kentucky case-law surrounding third-party beneficiaries
abrogates that law.
Kentucky, a third party can sue to enforce a contract only
when “the contract was made for his benefit.”
Sexton v. Taylor Cty., 692 S.W.2d 808, 810 (Ky. Ct.
App. 1985). Those individuals include donee and creditor
a donee beneficiary if the purpose of the promisee in buying
the promise is to make a gift to the beneficiary. A person is
a creditor beneficiary if the promisee's expressed intent
is that the third party is to receive the performance of the
contract in satisfaction of any actual or supposed duty or
liability of the promisee to the beneficiary. Id.
(citing King v. National Indus. Inc., 512 F.2d 29,
33 (6th Cir. 1975)). In essence, Kentucky requires that the
third party be an intended beneficiary. However, this sort of
relationship simply does not exist between an insurance
company and an injured plaintiff without a judgment finding
liability on the part of the insureds. Kentucky Hosp.
Ass'n Trust v. Chicago Ins. Co., 978 S.W.2d 754, 755
(Ky. Ct. App. 1998) (collecting cases). See also Kowalski
v. Holden, 276 F.2d 359, 630-61 (6th Cir. 1960)
(“An insurance company in a case of this kind is an
indemnitor of the defendant. The relationship between the
defendant and the company is fixed by contract.”).
also argue that KUCSPA has worked a change in the law. KUCSPA
requires the company to “conduct a reasonable
investigation based upon all available information, ”
Ky. Rev. Stat. § 304.12-230(4), and “attempt in
good faith to effectuate prompt, fair and equitable
settlements of claims in which liability has become
reasonably clear, ” Id. at §
304.12-230(6). Such a requirement, Plaintiffs reason, does
not limit a “direct action” since liability can
become “reasonably clear” prior to a finding of
liability by a factfinder.
this reliance is misplaced:
The gravamen of the UCSPA is that an insurance company is
required to deal in good faith with a claimant, whether an
insured or a third-party, with respect to a claim which the
insurance company is contractually obligated to pay.
Absent a contractual obligation, there simply is no bad faith
cause of action, either at common law or by statute.
Davidson v. Am. Freightways, Inc., 25 S.W.3d 94, 100
(Ky. 2000) (emphasis in original). Further, the Supreme Court
of Kentucky has interpreted the “reasonably
clear” language in § 304.12-230(6) to refer only
to cases where “liability is beyond dispute.”
Coomer v. Phelps, 172 S.W.3d 389, 395 (Ky. 2005).
See also Lee v. Medical Protective Co., 904
F.Supp.2d 648, 655 (E.D. Ky. 2012) (“this language was
clearly limited to cases where liability was a
certainty”). Here, there is a legitimate dispute over
liability ongoing in the state court action. The
determination of this case will depend on the resolution of
that cases Therefore, the Court must ...