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Pogue v. Principal Life Insurance Co.

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

December 31, 2019

JAMES H. POGUE, Plaintiff,



         This matter is before the Court on Plaintiff's Brief on Remaining Claims and Motion for Entry of Fed.R.Civ.P. 54(b) Judgment [R. 140] and Defendant's Brief regarding Plaintiff's Bifurcated Claims in Accordance with This Court's March 29, 2019 Order and Motion for Summary Judgment on Same [R. 141]. The Court's previous Order granting Defendants' Motion for Summary Judgment [R. 139] as to the breach of contract claim left remaining only bad faith claims against Principal Life Insurance Company (“Principal”). Defendant argues that precedent clearly mandates that the bad faith claims must fail, since Principal has no obligation to pay Plaintiff under the terms of the relevant insurance policy. Plaintiff argues that this is wrong. For the reasons explained below, the Court will grant Defendant's Motion for Summary Judgment on the remaining claims in this case, and will deny Plaintiff's Motion for Rule 54(b) Judgment as moot.

         I. STANDARD

         Summary judgment is proper where “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). When determining a motion for summary judgment, a court must construe the evidence and draw all reasonable inferences from the underlying facts in favor of the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Lindsay v. Yates, 578 F.3d 407, 414 (6th Cir. 2009). The court may not “weigh the evidence and determine the truth of the matter” at the summary judgment stage. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 265 (1986). When, as here, the defendant moves for summary judgment, “[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Id. at 252. The initial burden of establishing no genuine dispute of material fact rests with the moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The Court “need consider only the cited materials, but it may consider other materials in the record.” Fed.R.Civ.P. 56(c)(3). If the moving party satisfies this burden, the burden then shifts to the nonmoving party to produce “specific facts” showing a “genuine issue” for trial. Id. at 324. Where “a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact, ” the Court may treat that fact as undisputed. Fed.R.Civ.P. 56(e).

         A fact is “material” if the underlying substantive law identifies the fact as critical. Anderson, 477 U.S. at 248. Thus, “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.” Id. A “genuine” issue exists if “there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.” Id. at 249.

         II. ANALYSIS

         In the Sixth Circuit's opinion affirming the district court's decision in the companion case to this matter, Pogue v. Nw. Mutual Life Ins. Co., 2019 WL 1376032 (6th Cir. Feb. 7, 2019) (“Pogue I”), the court clearly explained:

the very cases that Pogue cited in support of his motion to bifurcate make clear that this type of case “lends itself to bifurcation under Rule 42(b) because if a bad-faith claimant cannot prevail on the coverage issue, [his] claim of bad-faith necessarily fails.” Nationwide Mut. Fire Ins. v. Jahic, No. 3:11-CV-00155, 2013 WL 98059, at *2 (W.D. Ky. Jan. 7, 2013) (citing Brantley v. Safeco Ins. Co. of Am., No. 1:11-CV-00054-R, 2011 WL 6012554, at *2 (W.D. Ky. Dec. 1, 2011)). . . . Moreover, in granting Pogue's motion to bifurcate, the magistrate judge explicitly noted that “if [Pogue's] contract claim is resolved in [Northwestern Mutual's] favor, [Pogue's] bad-faith claims will necessarily fail.” The magistrate judge thus concluded that “[a] trial on Counts B, C, and D will be conducted only if [Pogue] prevails on Count A, his breach of contract claim.” Based on the foregoing, the district court did not abuse its discretion in sua sponte disposing of Pogue's bifurcated claims after entering summary judgment in favor of Northwestern Mutual on Pogue's breach-of-contract claim.

Pogue v. Nw. Mut. Life Ins. Co., No. 18-5291, 2019 WL 1376032, at *5 (6th Cir. Feb. 7, 2019).

         Nevertheless, to ensure that both parties received a full and fair chance to brief the issues, rather than exercise its discretion to dispose of the bifurcated claims in this case sua sponte, the Court directed the parties to file briefs addressing whether the bad faith claims necessarily fail given the earlier ruling on insurance coverage. Defendant argues that under Kentucky precedent, they do, meaning that there is no genuine dispute of material fact and it is entitled to judgment as a matter of law. Plaintiff repeatedly cites the same four cases for his argument that the bad faith claims do not necessarily fail: PBI Bank, Inc. v. Signature Point Condominiums LLC, 535 S.W.3d 700 (Ky. Ct. App. 2016); State Auto Prop. & Cas. Ins. Co. v. Hargis, 785 F.3d 189 (6th Cir. 2015); James T. Scatuorchio Racing Stable, LLC v. Walmac Stud Mgmt., LLC, 941 F.Supp.2d 807 (E.D. Ky. 2013); and Knotts v. Zurich Ins. Co., 197 S.W.3d 512 (Ky. 2006). But none of these authorities supports Plaintiff's position.

         First, while the Kentucky Court of Appeals in PBI Bank did state as a general rule that “[i]n order to show a violation of the implied covenant of good faith and fair dealing, a showing of breach of contract is ordinarily not required, ” it went on to explain that “the party asserting the violation must provide evidence sufficient to support a conclusion that the party alleged to have acted in bad faith has engaged in some conduct that denied the benefit of the bargain originally intended by the parties.” PBI Bank, 535 S.W.3d at 718 (internal quotation marks omitted). Further, PBI Bank did not involve the insurance context and neither cited to nor overruled any authority specifically addressing the requirements of bad faith claims against insurers. PBI Bank, 535 S.W.3d at 718.

         Second, the Hargis case which Plaintiff cites clearly shows that under binding Kentucky precedent, an insurer must be obligated to pay the claim under the terms of the policy before a bad faith claim of any kind will lie:

In all, Kentucky recognizes four categories of bad faith claims that may be brought against an insurance company: two common law tort theories for an insurer's breach of the duty of good faith (first-party and assignment to a third-party); and two statutory causes of action premised on an insurer's violation of either the Kentucky Consumer Protection Act (KCPA) or the Kentucky Unfair Claims Settlement Practices Act (KUCSPA). See Rawe, 462 F.3d at 526-27; Motorist Mut. Ins. Co. v. Glass, 996 S.W.2d 437, 451-52 (Ky.1997) (discussing development of bad faith law in Kentucky). A single standard applies to all four categories of bad faith claims, which requires that the insured prove three elements:
“(1) the insurer must be obligated to pay the claim under the terms of the policy; (2) the insurer must lack a reasonable basis in law or fact for denying the claim; and (3) it must be shown that the insurer either knew there was no reasonable basis for denying the claim or acted with reckless disregard for whether such a basis existed[.]” Wittmer v. Jones,864 S.W.2d 885, 890 (Ky.1993) (quoting ...

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