Stevens v. Motorists Mut. Ins. Co.
| Citation | 77 A.L.R. 4th 985,759 S.W.2d 819 |
| Decision Date | 17 November 1988 |
| Docket Number | No. 88-SC-167-DG,88-SC-167-DG |
| Parties | James K. STEVENS and Iva Stevens, Appellants, v. MOTORISTS MUTUAL INSURANCE COMPANY, Appellee. |
| Court | United States State Supreme Court (Kentucky) |
David L. Holmes, Bernard F. Lovely, Vimont & Wills, Lexington, for appellants.
James D. Ishmael, Jr., Wyatt, Tarrant & Combs, Lexington, for appellee.
This appeal is from the decision of the Court of Appeals which affirmed dismissal of the Stevens' claim against Motorists Mutual Insurance Company, their homeowners' insurance company, under the Consumer Protection Act, KRS 367.220(1), for unfair, false, misleading and deceptive acts.
Two issues are presented:
1) Does the Kentucky Consumer Protection Act provide homeowners with a remedy against their own insurance company? This turns on whether the Stevens purchased "goods or services" as covered by the Act.
2) If the Consumer Protection Act establishes a cause of action, did the Stevens present sufficient evidence of false, misleading or deceptive acts to withstand a motion for directed verdict?
Following blasting for nearby sewer construction work, the Stevens noticed damage to their home which was timely reported to Motorists, whose policy covered such blasting-related damage. A claims adjuster for Motorists advised the Stevens and their attorney that two of its engineers had discovered no blasting-related damage to the residence, and as a result, the insurance company denied the claim. The Stevens then sued the construction company for the alleged blasting damage and also sued Motorists on various theories which ultimately included not only the original breach of contract and common law bad faith but also a statutory claim under the Consumer Protection Act. Only the breach of contract theory reached the jury which unanimously awarded the Stevens $9,000. A directed verdict against the Stevens on the Consumer Protection Act claim is the subject of this appeal. The Court of Appeals affirmed the decision of the circuit court stating that the acts complained of were not within the provisions of the statute.
The Stevens maintain their insurance company intentionally misrepresented the engineers' reports and arbitrarily refused to negotiate their claim. The Kentucky Consumer Protection Act, KRS 367.220, does provide a homeowner with a remedy for the conduct of their own insurance company in denying such a claim because the act has provided a "statutory" bad faith cause of action. The Stevens have a cause of action against Motorists for unlawful acts pursuant to KRS 367.170 and cognizable under KRS 367.220(1).
KRS 367.220(1) provides that:
Any person who purchases or leases goods or services primarily for personal, family or household purposes and thereby suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or practice declared unlawful by KRS 367.170, may bring an action.... Nothing in this subsection shall be construed to limit a person's right to seek punitive damages where appropriate. (Emphasis added.)
We hold that the purchase of an insurance policy is a purchase of a "service" intended to be covered by the Consumer Protection Act. The Stevens purchased a homeowners' insurance policy protecting their home against certain losses and are the class of persons who purchased services primarily for personal, family or household purposes.
KRS 367.170(1) provides that:
Unfair, false, misleading, or deceptive acts or practices in the conduct of any trade or commerce, are hereby declared unlawful.
The terms "false, misleading and deceptive" has sufficient meaning to be understood by a reasonably prudent person of common intelligence. Dare to be Great, Inc. v. Commonwealth, ex rel Hancock, Ky., 511 S.W.2d 224 (1974). Therefore, when the evidence creates an issue of fact, that any particular action is unfair, false, misleading or deceptive it is to be decided by a jury. The trial court denied the Stevens the right to have this factual question determined by a jury when it directed a verdict against them.
This is a question of first impression in Kentucky. However, several other states have decided this issue. Washington, Pennsylvania, Massachusetts, Texas and Illinois have held that insurance practices can give an insured a cause of action under their particular consumer protection acts against an insurer. Also, a federal court has held that insurance is a "service" under the Connecticut Consumer Protection Act. Doyle v. St. Paul Fire & Marine Insurance Co., 583 F.Supp. 554 (D.Conn.1984).
Washington, in a unanimous en banc decision, held that post-sale actions by an insurer which were unlawful and against public policy, were covered by the Consumer Protection Act of that state. Salois v. Mutual of Omaha Ins. Co., 90 Wash.2d 355, 581 P.2d 1349 (1978); Whistman v. West American of Ohio Cas. Group, 38 Wash.App. 580, 686 P.2d 1086 (1984).
Pennsylvania held that a claim against an insurer based on an unfair or deceptive act or practice stated a cause of action under that state's Consumer Protection Law. Pekular v. Eich, 355 Pa.Super. 276, 513 A.2d 427 (1986).
Massachusetts held that the sale of a motor vehicle insurance policy was a sale of property and of services within the meaning of their Consumer Protection Act and that a cause of action was provided in the law for false and deceptive insurance practices. Dodd v. Commercial Union Ins. Co., 373 Mass. 72, 365 N.E.2d 802 (1977). This holding was later extended to homeowner's insurance in Noyes v. Quincy Mutual Fire Ins. Co., 7 Mass.App. 723, 389 N.E.2d 1046 (1979).
The Texas courts have held that the term "services" includes the purchase of insurance policies. McNeill v. McDavid Ins. Agency, 594 S.W.2d 198 (Tex.Civ.App.1980); Ranger County Mut. Ins. Co. v Guinn, Tex.Civ.App., 608 S.W.2d 730 (1980); Dairyland County Mutual Ins. Co. v. Harrison, 578 S.W.2d 186 (Tex.Civ.App.1979); McCrann v. Klaneckey, 667 S.W.2d 924 (Tex.App. 13 Dist. 1984); Allstate Ins. Co. v. Kelly, 680 S.W.2d 595 (Tex.App. 12 Dist. 1984).
Likewise, Illinois has held that the sale of insurance is a service under their Consumer Fraud and Deceptive Business...
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