Rawe v. Liberty Mut. Fire Ins. Co.

• Decision Date: 01 September 2006
• Docket Number: No. 05-5485.,05-5485.
• Citation: 462 F.3d 521
• Parties: Melissa RAWE; Thomas J. Rawe; Kimberly Rawe, Plaintiffs-Appellants, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY; Cynthia Holtcamp, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

462 F.3d 521

Melissa RAWE; Thomas J. Rawe; Kimberly Rawe, Plaintiffs-Appellants, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY; Cynthia Holtcamp, Defendants-Appellees.

No. 05-5485.

United States Court of Appeals, Sixth Circuit.

Argued: January 26, 2006.

Decided and Filed: September 1, 2006.

COPYRIGHT MATERIAL OMITTED

ARGUED: Milton S. Goff, Ft. Mitchell, Kentucky, for Appellants. Peter Matthew Cummins, Frost Brown Todd, Louisville, Kentucky, for Appellees. ON BRIEF: Milton S. Goff, Ft. Mitchell, Kentucky, for Appellants. Peter Matthew Cummins, Robert L. Steinmetz, Frost Brown Todd, Louisville, Kentucky, for Appellees.

Before: SILER, BATCHELDER, and MOORE, Circuit Judges.

OPINION

KAREN NELSON MOORE, Circuit Judge.

Plaintiffs-Appellants Melissa Rawe, Thomas Rawe, and Kimberly Rawe appeal the district court's grant of defendants' motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). After Melissa Rawe was severely injured in a car accident, she sought to recover under two insurance policies issued by Defendants-Appellees Liberty Mutual and Cynthia Holtkamp,¹ (referred to collectively as "Liberty Mutual"), who is one of Liberty Mutual's claims adjusters. When Liberty Mutual² refused to pay the insurance claim Rawe sought, she filed suit, alleging first- and third-party statutory and common law bad faith as well as breach of contract and fraud claims against Liberty Mutual. Liberty Mutual filed a motion for judgment on the pleadings, which the district court granted. For the reasons explained below, we REVERSE the district court's grant of judgment on the pleadings to Liberty Mutual on Rawe's first-party bad faith claims that are based upon defendant's alleged actions that occurred after the filing of Rawe's complaint in the first suit in October 2003, as they are not barred by claim preclusion. We also REVERSE the district court's dismissal of Rawe's third-party claims under the Kentucky Unfair Claims Settlement Practices Act ("KUCSPA"). We AFFIRM the district court's grant of judgment on the pleadings to Liberty Mutual on Rawe's other claims.

I. BACKGROUND

On September 22, 2000, Plaintiff-Appellant Melissa Rawe, then a minor, was a passenger in an automobile driven by Benjamin Haggard. Joint Appendix ("J.A.") at 16-17 (Compl. at ¶ 10). Haggard lost control of the vehicle, crossed the median in the road, and struck an oncoming vehicle, causing an accident in which Rawe sustained serious and permanent injuries. J.A. at 17 (Compl. at ¶ 10). Rawe's head trauma included "an injury to the right occipital lobe of her brain resulting in a 14% neuropsychiatric impairment and a permanent loss of a portion of her vision." J.A. at 17 (Compl. at ¶ 13). When the accident occurred, Haggard held a bodily injury policy ("bodily injury policy") with a limit of $100,000 with Liberty Mutual. J.A. at 17 (Compl. at ¶ 11); J.A. at 52 (Answer at 1). Rawe and her parents, Thomas and Kimberly Rawe, were also insured by Liberty Mutual pursuant to an underinsured motorist policy ("UIM policy"). J.A. at 17 (Compl. at ¶ 11); J.A. at 52 (Answer at 1). The UIM policy covered three vehicles owned by the Rawes and had a policy limit of $50,000/$100,000 per vehicle, per accident. J.A. at 117 (Oct. 2003 Compl. at ¶ 11).

After more than two years of negotiating with Liberty Mutual and with the assistance of an attorney, Rawe obtained a settlement for the full $100,000 available under Haggard's bodily injury policy in September 2002. J.A. at 19 (Compl. at ¶ 28); J.A. at 52 (Answer at 1). Rawe continued to pursue a claim under her family's personally held UIM policy, and when correspondence with defendant Liberty Mutual did not produce a settlement offer, Rawe filed suit in October 2003 to satisfy her claim under the UIM policy. J.A. at 115 (Oct.2003 Compl.). Rawe brought her lawsuit in state court (No. 03-CI-2809), but Liberty Mutual removed the case to federal court, invoking diversity jurisdiction.³ Docket Rep. in Case 2:03-CV-252-WOB at R.1. This case was mediated and in February 2004 Liberty Mutual made its first offer of $35,000, which Rawe rejected. J.A. at 24 (Compl. at ¶ 57). Liberty Mutual made a further offer of $45,000 later in February 2004, which Rawe accepted. J.A. at 24 (Compl. at ¶¶ 59-60). On March 8, 2004, the district court entered a judgment in favor of Rawe for $45,000 plus interest. Docket Rep. in Case 2:03-CV-252-WOB at R.8. After this judgment was entered, defendant Liberty Mutual demanded that Rawe execute a Release and Settlement Agreement releasing any and all future claims, including claims that were not part of that action, before Liberty Mutual would comply with the judgment and render payment of the $45,000. J.A. at 24 (Compl. at ¶ 60); J.A. at 211-18 (Mar. 5, 2004 Letter and Proposed Release). Rawe refused to sign the release, J.A. at 225 (Mar. 17, 2004 Letter) and filed a motion for issuance of writ of execution to obtain the $45,000 judgment. J.A. at 226-27 (Mot. for Issuance of Writ of Exec.). Defendant Liberty Mutual eventually satisfied its obligation under the March 2004 judgment, and the district court issued an order of satisfaction and dismissal with prejudice on May 3, 2004. Docket Rep. in Case 2:03-CV-252-WOB at R.14.

Rawe filed this lawsuit on June 18, 2004 in Kentucky state court (No. 04-CI-1573) alleging that Liberty Mutual's actions during the attempted settlement of both the bodily injury and UIM claims violated the Kentucky Unfair Claims Settlement Practices Act ("KUCSPA") (Count I), constituted a breach of contract and the tort of first- and third-party common-law bad faith (Count II), violated the Kentucky Consumer Protection Act ("KCPA") (Count III), and constituted fraud (Count IV). J.A. at 15-31 (Compl.). Liberty Mutual again sought removal, invoking diversity jurisdiction. J.A. at 6-10 (Notice of Removal). On October 4, 2004, Liberty Mutual filed a motion for judgment on the pleadings, J.A. at 97, 101 (Mot. and Mem. for Judgment on Pleadings), arguing that all of Rawe's claims failed as a matter of law. Liberty Mutual argued that Rawe's claims based upon alleged conduct occurring prior to the filing of the complaint in the first lawsuit in October 2003 are barred by the doctrine of res judicata, and that her claims that alleged conduct that occurred after the filing of the first lawsuit are insufficient for relief under Kentucky law. J.A. at 104-05 (Mem. in Support of Mot. for Judgment on Pleadings). Rawe opposed this motion, arguing that the claims based upon Liberty Mutual's conduct allegedly occurring both before and after the filing of the first lawsuit are not barred by res judicata, and that the alleged conduct after the filing of the first suit can support her bad-faith claims. J.A. at 179 (Plaintiff's Mot. in Opp. to Def. Mot. for Judgment on Pleadings).

In an order issued on March 3, 2005, the district court granted Liberty Mutual's motion for judgment on the pleadings, and dismissed all of Rawe's claims. J.A. at 36-37 (Order at 1-2). The district court dismissed Rawe's claims based upon Liberty Mutual's handling of her claim for benefits under the UIM policy on res judicata grounds. J.A. at 46-47 (Order at 11-12). The district court also dismissed Rawe's third-party common-law bad-faith claim because of the lack of any assignment of rights from Haggard to Rawe, J.A. at 41-42 (Order at 6-7), and found insufficient evidence of Liberty Mutual's outrageous conduct or Rawe's resultant damages to substantiate her third-party KUCSPA claim. J.A. at 47-49 (Order at 12-14). Rawe filed a timely notice of appeal.⁴ J.A. at 50 (Notice of Appeal).

II. ANALYSIS

A. Standard of Review

We review de novo a judgment on the pleadings under Federal Rule of Civil Procedure 12(c). Ziegler v. IBP Hog Market, Inc., 249 F.3d 509, 511-12 (6th Cir.2001). "For purposes of a motion for judgment on the pleadings, all well-pleaded material allegations of the pleadings of the opposing party must be taken as true, and the motion may be granted only if the moving party is nevertheless clearly entitled to judgment." Southern Ohio Bank v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 479 F.2d 478, 480 (6th Cir.1973). A Rule 12(c) "motion is granted when no material issue of fact exists and the party making the motion is entitled to judgment as a matter of law." Paskvan v. City of Cleveland Civil Serv. Comm'n, 946 F.2d 1233, 1235 (6th Cir.1991). "In reviewing the motion, we must construe the complaint in the light most favorable to the plaintiff, accept all of the complaint's factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of [her] claim that would entitle [her] to relief." Ziegler, 249 F.3d at 512.

As we are sitting in diversity, we apply the substantive law of Kentucky, the forum state. Himmel v. Ford Motor Co., 342 F.3d 593, 598 (6th Cir.2003). Where we confront an issue that "has not yet been resolved by the [Kentucky] courts, we must attempt to predict what the [Kentucky] Supreme Court would do if confronted with the same question." Id. We review de novo the district court's applications and determinations of Kentucky law. Salve Regina Coll. v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991).

B. Bad Faith Under Kentucky Law

Rawe argues that Liberty Mutual violated its good faith obligations under Kentucky law in its handling of her bodily injury and UIM claims. Rawe also argues that Liberty Mutual's actions "during the litigation [of these disputed claims] and post-litigation contributed to its violations" of Kentucky law. Appellant Br. at 6. Because Rawe and her parents were insured by Liberty Mutual under their UIM policy, Rawe's claims stemming from Liberty Mutual's handling of the UIM claim are first-party bad-faith claims. Given that Haggard was the insured under the bodily injury claim, Rawe's claims pursuant to that policy are considered third-party bad-faith claims. See Motorists Mut....