Empire Fire & Marine Ins. Co. v. Simpsonville Wrecker Service, Inc., No. 92-CA-2738-MR

CourtCourt of Appeals of Kentucky
Writing for the CourtGUDGEL; Similarly
Citation880 S.W.2d 886
PartiesEMPIRE FIRE & MARINE INSURANCE COMPANY, Appellant, v. SIMPSONVILLE WRECKER SERVICE, INC., Appellee.
Docket NumberNo. 92-CA-2738-MR
Decision Date29 April 1994

Page 886

880 S.W.2d 886
EMPIRE FIRE & MARINE INSURANCE COMPANY, Appellant,
v.
SIMPSONVILLE WRECKER SERVICE, INC., Appellee.
No. 92-CA-2738-MR.
Court of Appeals of Kentucky.
April 29, 1994.
Discretionary Review Denied by Supreme Court Aug. 24, 1994.

Page 887

Wayne J. Carroll, Edward H. Bartenstein, Louisville, for appellant.

Charles F. Merz, Laurence J. Zielke, Louisville, for appellee.

Before GUDGEL, McDONALD and WILHOIT, JJ.

GUDGEL, Judge:

This is an appeal from a judgment entered by the Jefferson Circuit Court in a tort action for damages which was based upon an insurer's alleged bad faith refusal to pay its insured's claim under a motor cargo liability endorsement attached to a liability insurance policy. Previously, this court determined in this same matter that the insurer's policy was ambiguous and therefore must be construed to provide coverage for the insured's loss. Simpsonville Wrecker Service, Inc. v. Empire Fire & Marine Insurance Company, Ky.App., 793 S.W.2d 825 (1989). After a second trial a jury determined that there was no basis in law or fact to justify the denial of the insured's claim, and that the insurer either knew there was no reasonable basis for denying the claim or acted in reckless disregard for whether such a basis existed. On appeal, appellant insurer contends that the trial court erred (1) by failing to grant its motions for a directed verdict, (2) by admitting damage evidence which was too speculative to support a jury verdict, and (3) by failing to find that appellee had released its claim. As we agree with appellant's first contention, we reverse and remand without addressing its remaining contentions.

In May 1987 appellee was employed to transport a heavy piece of equipment from Texas to Indiana. The equipment, but not appellee's vehicle, incurred severe damage during the trip when the equipment struck a highway overpass. Appellee then sought reimbursement for the loss under the cargo transportation coverage endorsement included in a liability insurance policy issued by appellant. However, because appellee's vehicle did not itself collide with the overpass, appellant denied appellee's claim on the ground that no covered loss had occurred because appellee did not have all-risk cargo insurance coverage, but instead had limited insurance coverage only for collisions between the insured vehicle and other vehicles or objects. This action then was filed in the circuit court.

The trial court granted appellant a summary judgment on the ground that there was no coverage for the loss under appellee's policy. On appeal, however, in a two-to-one decision this court determined otherwise, stating as follows:

Given the facts that the policy herein was for cargo in transit and specified cargo insofar as cranes are concerned, and that the coverage was not for the vehicle itself, considered in light of the language's ambiguity as well as the policy as a whole, we must agree with the views expressed hereinabove. This we do in light of the mandate of Wolford v. Wolford, Ky., 662 S.W.2d 835, 838 (1984), requiring that if a contract is capable of two constructions or if its language is ambiguous then it must be liberally construed in order to resolve any doubts in favor of the insured.

Simpsonville, supra at 829.

On September 19, 1990, after the supreme court denied a motion for discretionary review, this case was remanded to the circuit court with directions to reinstate appellee's complaint and to conduct a jury trial as to the parties' respective claims. Before the scheduled trial date, however, appellant consented

Page 888

to the entry of a judgment against it for the amount of the insured loss. Further, appellee settled its claims against an independent insurance agent and an excess lines broker relating to their alleged failure to procure the all-risk policy requested by appellee. Hence, the only matter tried before the jury was appellee's action against appellant for compensatory and punitive damages stemming from the latter's alleged bad faith refusal to pay.

At the conclusion of the trial the court first instructed the jury that appellant was obligated to promptly pay appellee's claim. The jury was asked to determine whether appellant's failure to promptly pay that claim lacked a reasonable basis in law or fact, and whether appellant either knew it lacked a reasonable basis for denying the claim or acted in reckless disregard for whether such a basis existed. The jury answered the court's interrogatory in the affirmative. It awarded appellee $318,775 in compensatory damages for lost profits but nothing for punitive damages. This appeal followed.

First, appellant contends that the court erred by failing to grant its motions for a directed verdict. We agree.

In order to maintain a private cause of action for tortious misconduct justifying a claim of bad faith, an insured must prove (1) that the insurer was obligated to pay, (2) that the insurer lacked "a reasonable basis in law or fact for denying the claim," and (3) 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, Ky., 864 S.W.2d 885, 890 (1993). The reported Kentucky cases involving the tort of bad faith refusal to pay, however, are factually distinguishable and do not govern the precise issue presented here. In Feathers v. State Farm Fire & Casualty Co., Ky.App., 667 S.W.2d 693 (1983), overruled, 711 S.W.2d 844 (1986), Federal Kemper Insurance Co. v. Hornback, Ky., 711 S.W.2d 844 (1986), overruled, 784 S.W.2d 176 (1989), Curry v. Fireman's Fund Insurance Co., Ky., 784 S.W.2d 176 (1989), and Wittmer, supra, each insurer's liability for bad faith refusal to pay...

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49 practice notes
  • Farmland Mut. Ins. Co. v. Johnson, No. 1998-SC-0938-DG.
    • United States
    • United States State Supreme Court (Kentucky)
    • October 26, 2000
    ...885, 890 (1993); Federal Kemper Insurance Company v. Hornback, Ky., 711 S.W.2d 844, 846-847 (1986) (Leibson, J., dissenting). 8. Ky.App 880 S.W.2d 886 9. Id. at 889-890 (citations omitted). 10. Id. at 887. 11. Id. at 888-889. 12. Id. at 890-891. 13. See Guaranty National Ins. Co. v. George,......
  • First Nat. Bank of Louisville v. Lustig, No. 94-30619
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • September 30, 1996
    ...846-849 (Leibson, J., dissenting); Curry, 784 S.W.2d at 178; and see Empire Fire & Marine Ins. Co. v. Simpsonville Wrecker Serv., Inc., 880 S.W.2d 886, 890 (Ky.Ct.App.1994). In the present case, the Sureties contend that the bond's coverage was fairly debatable on the law and, as such, the ......
  • Travelers Indem. Co. v. Armstrong, 2017-SC-000041-DG
    • United States
    • United States State Supreme Court (Kentucky)
    • November 1, 2018
    ...of whether the debate concerns a matter of fact or one of law." Empire Fire & Marine Ins. Co. v. Simpsonville Wrecker Serv., Inc., 880 S.W.2d 886, 889-90 (Ky. App. 1994) (citing Davis v. Allstate Insurance Co., 101 Wis.2d 1, 303 N.W.2d 596 (1981) and Anderson v. Continental Ins. Co., 85 Wis......
  • Motorists Mutual Insurance Co. v. Glass, 95-SC-972-DG
    • United States
    • United States State Supreme Court (Kentucky)
    • October 30, 1997
    ...of Depp's 50% comparative negligence discount. Empire Fire & Marine Insurance Co. v. Simpsonville Wrecker Service, Inc., Ky. App., 880 S.W.2d 886 (1994); see Wittmer v. Jones, supra, at 890.[114] The Glasses also assert that Farm Bureau's reliance on the purported May 27, 1989 settlement co......
  • Request a trial to view additional results
49 cases
  • Farmland Mut. Ins. Co. v. Johnson, No. 1998-SC-0938-DG.
    • United States
    • United States State Supreme Court (Kentucky)
    • October 26, 2000
    ...885, 890 (1993); Federal Kemper Insurance Company v. Hornback, Ky., 711 S.W.2d 844, 846-847 (1986) (Leibson, J., dissenting). 8. Ky.App 880 S.W.2d 886 9. Id. at 889-890 (citations omitted). 10. Id. at 887. 11. Id. at 888-889. 12. Id. at 890-891. 13. See Guaranty National Ins. Co. v. George,......
  • First Nat. Bank of Louisville v. Lustig, No. 94-30619
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • September 30, 1996
    ...846-849 (Leibson, J., dissenting); Curry, 784 S.W.2d at 178; and see Empire Fire & Marine Ins. Co. v. Simpsonville Wrecker Serv., Inc., 880 S.W.2d 886, 890 (Ky.Ct.App.1994). In the present case, the Sureties contend that the bond's coverage was fairly debatable on the law and, as such, the ......
  • Travelers Indem. Co. v. Armstrong, 2017-SC-000041-DG
    • United States
    • United States State Supreme Court (Kentucky)
    • November 1, 2018
    ...of whether the debate concerns a matter of fact or one of law." Empire Fire & Marine Ins. Co. v. Simpsonville Wrecker Serv., Inc., 880 S.W.2d 886, 889-90 (Ky. App. 1994) (citing Davis v. Allstate Insurance Co., 101 Wis.2d 1, 303 N.W.2d 596 (1981) and Anderson v. Continental Ins. Co., 85 Wis......
  • Motorists Mutual Insurance Co. v. Glass, 95-SC-972-DG
    • United States
    • United States State Supreme Court (Kentucky)
    • October 30, 1997
    ...of Depp's 50% comparative negligence discount. Empire Fire & Marine Insurance Co. v. Simpsonville Wrecker Service, Inc., Ky. App., 880 S.W.2d 886 (1994); see Wittmer v. Jones, supra, at 890.[114] The Glasses also assert that Farm Bureau's reliance on the purported May 27, 1989 settlement co......
  • Request a trial to view additional results

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