Auto-Owners Ins. Co. v. Warren
| Decision Date | 11 July 2014 |
| Docket Number | NO. 2013-CA-000372-MR,2013-CA-000372-MR |
| Parties | AUTO-OWNERS INSURANCE COMPANY APPELLANT v. LISA WARREN APPELLEE |
| Court | Kentucky Court of Appeals |
NOT TO BE PUBLISHED
APPEAL FROM FRANKLIN CIRCUIT COURT
In 2003, Warren purchased an "all perils" homeowner's insurance policy on her property in Frankfort, Kentucky. This policy insured Warren's home, premises, and personal property from, inter alia, a wind storm. Warren purchased additional insurance which covered her home in the event of "earth movement meaning earthquake." However, the policy excluded "flood or tidal wave; landslide, mud flow, erosion, earth sinking, rising or shifting...." Warren made timely payment of her insurance premiums and her coverage never lapsed.
During a March 1, 2009 storm, a tree, soil, and several large rocks fell from above the sheer rock face of a hill behind Warren's home, landing on the roof of the home and causing significant damage to the home's roof and structure. Immediately following the storm, Warren notified Auto-Owners of the damage and submitted a claim. She also employed a local contractor to clear the debris from the roof and to place large tarps over the damaged areas of the roof. In the subsequent days, Warren obtained several estimates for repair of the damage. One of these was provided by Meyer-Midwest, Inc., and totaled $27,900.
Sixteen days after the incident, Auto-Owners notified Warren that it was denying coverage of the damage because the terms of the insurance contract specifically excluded "earth movement," which Auto-Owners had determined caused the damage. Warren requested that Auto-Owners reconsider this decision;however, in a May 7 letter, the company again declined to cover the damage, citing the exclusion under the contract for "landslide."
After briefly attempting to inhabit the damaged home, Warren found other living arrangements, eventually incurring more than $36,000 in living expenses. These expenses included costs associated with her purchase of another home. During this time, the condition of Warren's home deteriorated due to mold infestation and continuing cracking and settling. Accordingly, in the summer of 2011, Warren sought and received updated estimates for repairs on the home totaling $59,850 for structural improvements and more than $33,000 for the remediation of mold which developed in the time since the incident.
Following Auto-Owners' denial of coverage for the damage to her home, on June 1, 2009, Warren filed suit, alleging, inter alia, that the company breached several provisions of the insurance contract.
Following the deposition of several witnesses, including Warren and the insurance adjuster initially assigned to Warren's claim, both Warren and Auto-Owners sought summary judgment. In a January 12, 2011 order, the trial court granted partial summary judgment in favor of Warren. Specifically, the court held that the terms of the insurance policy were ambiguous and provided coverage for the damage to Warren's home. Hence, the court ruled that Auto-Owners was liable as a matter of law. However, the case proceeded on the issue of damages.
Following further discovery and a plethora of pretrial motions, the case proceeded to a jury trial on damages in October 2012. Warren testified to the events surrounding the damage to her home, to her efforts to make temporary repairs to her home, to the costs and estimated costs associated with further repairs, as well as the costs she incurred in finding another place to live. In addition to Warren's testimony, the jury heard from those who had provided Warren advice regarding damage to the home, necessary repairs, and the cost of those repairs.
Following proof, the jury returned a verdict for the full amount of compensatory damages Warren sought for repair of the home, her additional living expenses, and damaged or lost personal property. The jury's award totaled $119,913.47, plus interest. Auto-Owners filed motions for judgment notwithstanding the verdict ("JNOV") and for a new trial. Auto-Owners now appeals from the denial of these motions. Further facts are provided infra as necessary to fully develop our analysis of the several issues raised on appeal.
Auto-Owners raises a multitude of grounds for its appeal of the trial court's orders concerning summary judgment, directed verdict, JNOV, and new trial. It alleges error by the trial court on issues pertaining to its interpretation of the insurance contract, Warren's duty to mitigate her damages, admission of expert testimony, and the court's instruction of the jury. Auto-Owners also claims that the trial court erred in not setting aside the jury's award of damages because it wasexcessive and based upon "passion and prejudice." We address all of these issues in light of their appropriate standards of review, which are set out infra.
Auto-Owners first attacks the trial court's ruling granting partial summary judgment as to its liability under the insurance contract. In reviewing that ruling, we remember that "[t]he proper function of summary judgment is to terminate litigation when, as a matter of law, it appears that it would be impossible for the respondent to produce evidence at the trial warranting a judgment in his favor." Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). Therefore, for summary judgment to be proper, the movant must show that the adverse party cannot prevail under any circumstances. Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255, 256 (Ky. 1985). We review de novo the trial court's decision as to whether Warren made such a showing, as the question is purely a matter of law. Blevins v. Moran, 12 S.W.3d 698, 700 (Ky. App. 2000).
Warren's homeowner's policy was an "all perils" policy. She purchased additional coverage for "accidental direct physical loss" to her home, other structures, and personalty from damage "caused by earth movement meaning earthquake...." However, the policy also stated that it did not cover "[l]oss caused to any extent by ... landslide, mud flow, erosion, earth sinking, rising or shifting... ." The trial court concluded that this language was ambiguous, while Auto-Owners argues on appeal that the language was clear and that the damage to Warren's home was not covered because it was caused by erosion.
Kentucky law is well-settled in its preference for effectuating, not defeating, insurance coverage. See Pacific Mut. Life Ins. Co. v. Sutherland, 125 S.W.2d 769, 771 (Ky. 1939) (). In service to this preference, an insurance policy's "exceptions and exclusions should be strictly construed...." Kentucky Farm Bureau Mut. Ins. Co. v. McKinney, 831 S.W.2d 164, 166 (Ky. 1992); see also State Auto Mut. Ins. Co. v. Ellis, 700 S.W.2d 801, 803 (Ky. App. 1985) (citing to Davis v. American States Ins. Co., 562 S.W.2d 653 (Ky. App. 1978)).
We must also remember that an insurance policy is a contract. Consistent with traditional principles of contract, our Supreme Court has held that an insurance company, as the drafter of the policy, "must be held strictly accountable for the language used." Eyler v. Nationwide Mut. Fire Ins. Co., 824 S.W.2d 855, 860 (Ky. 1992). All doubts as to the interpretation of an insurance contract will be resolved in favor of the insured. See K.M.R. v. Foremost Ins. Group, 171 S.W.3d 751, 753 (Ky. App. 2005); see also Ellis, supra, at 803. However, unambiguous terms will be assigned their plain and ordinary meaning. See K.M.R. v. Foremost Ins. Group, 171 S.W.3d 751 at 753.
We first state that the trial court was correct in examining the language of the earthquake rider and deeming it ambiguous. On appeal, Auto-Owners asserts that the trial court erroneously focused on the "earthquake-relatedlanguage" of the policy in finding that an ambiguity existed. Auto-Owners instead states that the court should have examined what it calls "the unambiguous erosion exclusion" of the earthquake rider. This argument is disingenuous at best.
We first remember that the parties asked the trial court to interpret an "all perils" policy, not an "all perils but..." policy. Throughout the timeline of this case, Auto-Owners has changed the stated cause of the damage to Warren's home from "shifting and movement of the earth" (in its initial letter denying coverage) to "landslide" (in a second letter denying coverage) to a "rockfall" caused by "erosion" (in opposition to Warren's motion for summary judgment and on appeal). As the initial denial letter demonstrates, it was Auto-Owners, not the trial court, who first referenced "earth movement" as it was used in the earthquake rider. The trial court's attention was properly focused upon both the "earthquake-related language" and the exclusions under the earthquake rider.
We also agree with the trial court and Warren that at least one term of the insurance policy, "earth movement," is ambiguous as used in the coverage and exclusions portion of the policy. Warren's purchase of the earthquake policy modified the original homeowner's policy to include coverage for damage due to "earth movement meaning earthquake[,]" but to exclude coverage for damage caused by "earth movement" in the form of erosion, landslide, as well as "earth sinking, rising or shifting." These provisions are difficult to reconcile, as the exact interplay between them is difficult...
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