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Marrero v. Secura Insurance

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

January 24, 2019




         I. Introduction

         This 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.

         II. Factual Background

         The 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.

         Later, 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.


         The 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.

         In 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 beneficiaries:

         One is 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.”).

         Plaintiffs 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.

         However, 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 ...

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