Feathers v. State Farm Fire & Cas. Co.
| Decision Date | 05 August 1983 |
| Parties | Arthur K. FEATHERS and Mary Jane Feathers, Appellants, v. STATE FARM FIRE & CASUALTY COMPANY, Appellee. |
| Court | Kentucky Court of Appeals |
David E. Arvin, Hopkinsville, for appellants.
William J. Rudloff, Harlin, Parker & Rudloff, Bowling Green, for appellee.
Before HAYES, C.J., and COOPER and McDONALD, JJ.
This is an appeal by the policyholders of a homeowner's broad form fire insurance policy. A partial summary judgment was entered against the policyholders dismissing their claim against State Farm Fire & Casualty Company for an alleged breach of the insurance company's admitted duty to perform in good faith.
The policyholders are the appellants, Arthur K. and Mary Jane Feathers. They suffered a fire loss on May 31, 1981, which destroyed their home and personal belongings.
The appellants filed a claim with State Farm which was later reduced to a sworn proof of loss. The proof of loss was timely filed; however, it was rejected by State Farm on the grounds that it contained misrepresentations.
Almost a year after the fire, on May 28, 1982, the appellants filed suit to recover their losses. Their complaint contained two counts. Count One alleged:
Dwelling damage $69,000.00
Personal property loss $29,000.00
Loss of use of dwelling $ 5,000.00
It was also alleged that every policy condition and term was duly complied with and that repeated demands were made upon State Farm for payment but to no avail.
Count Two, in part, alleged that State Farm owed "a duty to act in good faith in effecting a fair and reasonable settlement of these just claims without harassment or unreasonable delay." Count Two also alleged that because State Farm refused to deal with the appellants fairly and pay their just and documented claims, the appellants suffered acute anxiety and mental suffering, and loss of consortium.
State Farm filed its answer admitting a duty to act in good faith with the appellants but said,
[T]he fire gives rise to the reasonable belief that said fire was the result of arson and that Plaintiffs [Featherses] or one of them with the knowledge of the other, burned or procured the burning of the dwelling house referred to in Plaintiffs' complaint. Said intentional burning of said dwelling house constituted fraud and voided the above-mentioned policy of insurance.
State Farm moved for summary judgment to dismiss Count Two of the complaint on the grounds that the appellants have no basis or standing under Kentucky law to assert such claim for consequential and punitive damages. The trial court sustained State Farm's motion for summary judgment and on October 28, 1982, dismissed that portion of the complaint requesting consequential and punitive damages.
Attention is drawn to the fact that the record is totally devoid of any proof or testimony except for the appellants' compliance with State Farm's request to produce certain documents. While the dismissal is noted to be pursuant to CR 56, we determine it was actually under CR 12, a judgment on the pleadings--more specifically, CR 12.02(f), failure to state a claim upon which relief can be granted. That is so because we cannot determine whether matters outside the pleadings were presented. We reason the dismissal was under CR 12.02(f) and CR 12.03. See LaVielle v. Seay, Ky., 412 S.W.2d 587 (1967), and Spillman v. Beauchamp, Ky., 362 S.W.2d 33, 2 A.L.R.3d 814 (1962). Accordingly, we conclude the trial court erred.
The question on appeal is whether the appellants pled a cause of action against State Farm for consequential and punitive damages.
The arguments run thus: The appellants rely mainly on Hensley v. Paul Miller Ford, Inc., Ky., 508 S.W.2d 759 (1974), and Manchester Ins. & Indem. Co. v. Grundy, Ky., 531 S.W.2d 493 (1975). In Hensley, supra, the court allowed consequential and punitive damages arising out of a car dealership wrongfully selling Mr. Hensley's car. The damages arose against the dealership for trover and conversion. The initial contacts between the parties was by contract but the wrongful sale of the vehicle of Mr. Hensley became an independent tort.
In Manchester, supra, the insurance company failed to settle a case within its policy limits which obviously should have been settled, and as a result exposed its insured to an excess judgment which was obtained by the injured party. There, the Court said the insurance company did not fulfill its contractual obligation. The company was found guilty of bad faith in failing to settle; the damages were the difference between the policy limits and the excess judgment. See also State Farm Mutual Automobile Ins. Co. v. Marcum, Ky., 420 S.W.2d 113 (1967). These cases, and similar ones, are not akin to the situation at hand, and we are not persuaded by them in light of the facts and circumstances of our case.
The appellee relies on the principle of law that one may not recover consequential or punitive damages for breach of contract or mental anguish unaccompanied by physical injury. The appellee cites a long line of cases in support of this principle, namely: Cumberland Telephone and Telegraph Co. v. Cartwright Creek Telephone Co., 128 Ky. 395, 108 S.W. 875 (1908); Combs v. Southern Bell Telephone & Telegraph Co., 238 Ky. 341, 38 S.W.2d 3 (1931); Clark v. Life & Casualty Ins. Co., 245 Ky. 579, 53 S.W.2d 968 (1932); Hetrick v. Willis, Ky., 439 S.W.2d 942 (1969); Motorists Insurance Corporation v. Jackson, Ky., 340 S.W.2d 610 (1960); General Accident Fire & Life Assurance Corp. v. Judd, Ky., 400 S.W.2d 685 (1966); and Deaton v. Allstate Ins. Co., Ky.App., 548 S.W.2d 162 (1977).
We reason that for purposes of establishing a definite principle of law these and similar authorities are flawed from the outset, as they contain such modifiers to the principle of law as, "such damages ordinarily are not recoverable," "usually not allowed," "not recognized for mere breach": these implicitly indicate that there are exceptions to the principle. At oral argument, the appellants and the appellee hoisted their fate on Deaton, supra. The appellants want us to overrule it, and the appellee wants us to reaffirm it.
It is our opinion that we can do neither. We do not consider Deaton applicable to the present case. The Deaton court drew a distinction between third-party and first-party claims against an insurance company. The distinction was that in Deaton an insured was suing for bad...
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