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Hayden v. Benchmark Insurance Co.

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

July 11, 2019

MATTHEW HAYDEN and KENTUCKY PROSTHETICS, INC. PLAINTIFFS
v.
BENCHMARK INSURANCE COMPANY and VGM INSURANCE SERVICES, INC. DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          JOSEPH H. MCKINLEY JR., SENIOR JUDGE UNITED STATES DISTRICT COURT.

         This matter is before the Court on Defendants' Motion to Dismiss Plaintiffs' Complaint. [DN 9]. Fully briefed, this matter is ripe for decision. For the following reasons, the Defendants' Motion is GRANTED.

         I. Background

         Plaintiffs, Matthew Hayden and Kentucky Prosthetics, Inc., assert that Defendants, Benchmark Insurance Company and VGM Insurance Services, Inc., issued a liability insurance policy to Kentucky Prosthetics for the policy period of March 12, 2014 to March 12, 2015 (the “Benchmark Policy”). [DN 1-2 ¶ 9]. In September 2016, Edward Hawkins filed a lawsuit against Plaintiffs concerning events that occurred during the policy period. [Id. ¶ 10]. Plaintiffs claim they promptly notified Defendants of the lawsuit and complied with efforts taken by Defendants to investigate the matter. [Id. ¶ 11]. In November 2016, Defendants sent a letter to Plaintiffs informing them that they had reviewed the insurance policy and the underlying complaint and determined that no allegations triggered their duty to defend or indemnify the Plaintiffs. [DN 9 at 4]. The Defendants explained that because Mr. Hawkins' complaint did not allege any facts that met the definition of “bodily injury, ” “property damage, ” or “occurrence, ” there would be no coverage. [Id.].

         Turning to the underlying lawsuit, Plaintiffs allege that on September 19, 2016, they were sued in the Hardin County Circuit Court by Mr. Hawkins. [DN 1-2 ¶ 10]. Mr. Hawkins alleged that on April 15, 2014, he began the process of obtaining a prosthetic leg from Plaintiffs. [DN 9-1 ¶ 4]. Mr. Hawkins claimed he paid Plaintiffs the purchase price of $13, 525.00 for the prosthetic leg and its component parts. [Id. ¶ 5]. Despite full payment, Mr. Hawkins stated he did not receive the type of prosthetic leg or the accompanying parts represented by Plaintiffs. [Id. ¶ 6].

         Mr. Hawkins brought the underlying lawsuit as a breach of contract case against Plaintiffs. [Id. ¶¶ 8-18]. In Count I, he alleged that the foot and ankle he received from Plaintiffs were not the prosthetic contracted for and that the provided components did not fit properly. [Id. ¶ 10]. Mr. Hawkins alleged that he notified the Plaintiffs of the problems with the prosthetic in December 2014 and took remedial action over the next several months-phone calls and visits to the Plaintiffs-to try to mitigate the problems with the leg. [Id. ¶ 12]. The specific language of Count I states: “[Plaintiffs] breached the contract by not supplying [Mr. Hawkins] with a suitable prosthetic leg despite being compensated for said leg.” [Id. ¶ 14]. As such, Mr. Hawkins had to obtain a prosthetic leg from a different provider. [Id. ¶ 7]. In Count II of Mr. Hawkins' complaint, he alleged that Plaintiffs violated the Kentucky Consumer Protection Act (“KCPA”) because the Plaintiffs' failure to provide “the prosthetic leg contracted for, or any suitable prosthetic leg, amounted to unfair, false, misleading and/or deceptive acts and/or practices.” [Id. ¶ 17]. In the demand for relief, Mr. Hawkins sought damages for the “malicious, fraudulent, oppressive and/or recklessly committed breach of contract.” [Id. at Prayer for Relief].

         While Plaintiffs defended against Mr. Hawkins' lawsuit, they repeatedly requested that Defendants provide coverage-the Defendants refused. [Id. ¶¶ 23-27]. Despite Defendants' coverage denial, Plaintiffs allege the Defendants issued a check for the settlement amount in Mr. Hawkins' lawsuit and paid a portion of Plaintiffs' defense costs. [Id. ¶¶ 29-30]. Plaintiffs claim that, prior to making these payments, Defendants attempted to settle all claims in exchange for a signed release of the Plaintiffs' claims against the Defendants. [Id. ¶ 33]. Plaintiffs state that although they refused to sign the release and Defendants continued to deny coverage for Mr. Hawkins' lawsuit, Defendants still made the payments. [Id. ¶¶ 31, 37].

         II. Standard of Review

         Upon a motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), a court “must construe the complaint in the light most favorable to plaintiffs, ” League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007) (citation omitted), “accept all well-pled factual allegations as true, ” id., and determine whether the “complaint . . . states a plausible claim for relief, ” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Under this standard, the plaintiff must provide the grounds for its entitlement to relief, which “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff satisfies this standard only when it “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. A complaint falls short if it pleads facts “merely consistent with a defendant's liability” or if the alleged facts do not “permit the court to infer more than the mere possibility of misconduct.” Id. at 679. Instead, “a complaint must contain a ‘short and plain statement of the claim showing that the pleader is entitled to relief.'” Id. at 663 (quoting Fed.R.Civ.P. 8(a)(2)). “But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-‘that the pleader is entitled to relief.'” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         If “matters outside the pleadings are presented to and not excluded by the court” when ruling upon a motion under Rule 12(b)(6), the Federal Rules require that “the motion must be treated as one for summary judgment under Rule 56.” Fed.R.Civ.P. 12(d). This Rule does not require the Court to convert a motion to dismiss into a motion for summary judgment every time the Court reviews documents that are not attached to the complaint. Greenberg v. Life Ins. Co. of Va., 177 F.3d 507, 514 (6th Cir. 1999). “[W]hen a document is referred to in the complaint and is central to the plaintiff's claim . . . [, ] the defendant may submit an authentic copy [of the document] to the court to be considered on a motion to dismiss, and the court's consideration of the document does not require conversion of the motion to one for summary judgment.” Id. (quotation omitted).

         III. Discussion

         A. Breach of Contract Claim

         Defendants assert that they are entitled to a judgment in their favor on the Motion to Dismiss because the insurance policy issued to Plaintiffs does not provide coverage as a matter of law in the underlying lawsuit. [DN 9 at 1]. Specifically, Defendants maintain that Mr. Hawkins' breach of contract and KCPA claims do not arise from an “occurrence” as required by the insurance policy to trigger coverage, nor does Mr. Hawkins' lawsuit allege that he suffered “bodily injury” or “property damage” as defined by the insurance policy. [Id. at 6-11].

         Plaintiffs respond that Defendants breached the insurance contract by failing “to defend and agree to indemnify the Hawkins Case as required by the terms of the Policy.” [DN 1-2 ¶ 65]. As the basis for this position, Plaintiffs advance two arguments: (1) the Incidental Medical Professional Services Endorsement-referred to as the “Prosthetics Endorsement” by Plaintiffs-makes clear that an occurrence exists in this case and (2) liberally construing Mr. Hawkins' ...


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