Opinion
NO. 2017-CA-001870-MR
05-17-2019
ASHLEY CORIO APPELLANT v. NATIONAL SPECIALTY INSURANCE COMPANY APPELLEE
BRIEFS FOR APPELLANT: M. Austin Mehr Philip G. Fairbanks Erik D. Peterson Elizabeth A. Thornsbury Lexington, Kentucky BRIEF FOR APPELLEE: David W. Zahniser Fort Mitchell, Kentucky
NOT TO BE PUBLISHED APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE KIMBERLY N. BUNNELL, JUDGE
ACTION NO. 13-CI-02761 OPINION
AFFIRMING
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BEFORE: CLAYTON, CHIEF JUDGE; DIXON AND LAMBERT, JUDGES. CLAYTON, CHIEF JUDGE: Ashley Corio appeals from a Fayette Circuit Court order granting summary judgment to National Specialty Insurance Company (NSIC) on Corio's claims of bad faith against the insurer for its handling of her personal injury case. She also appeals from a subsequent order of the same court denying her motion to compel discovery. Corio argues that the grant of summary judgment was premature and that disputed issues of material fact exist regarding NSIC's alleged undervaluation and delayed payment of the claim. Having reviewed the record and applicable law, we affirm the trial court's rulings.
On July 9, 2012, Corio was injured when a tractor trailer ran a red light and struck her vehicle. Rosedale Transport Inc. owned the tractor trailer and employed the driver, Marty L. Rainey. NSIC was the primary liability insurer of Rosedale's vehicle. Corio was airlifted to the hospital where she was diagnosed with rib fractures and a left hip contusion. CT scans of her head, neck, chest and spine were otherwise normal. She also experienced joint separation in her shoulder which required reconstructive surgery on July 19, 2012. Three days after the accident, Rosedale received notice that Corio had retained counsel who was investigating the claim and would provide a settlement evaluation and demand.
Corio complained of memory loss following the accident and consulted Dr. Maria Pavez, a neurologist. Corio also consulted several other medical providers for symptoms including persistent headaches, hip, back and shoulder pain, insomnia, and anxiety.
In early April 2013, Corio was involved in a rear-end automobile collision. She went to the hospital complaining of injury to her head, shoulder, low back and neck. She allegedly sustained a blow to the head in this accident. A CT scan of her head and X-rays of her shoulder and spine were normal. She returned to the hospital the following week, reporting that she had collapsed and hit her face on the floor. Dr. Pavez noted that Corio had started suffering from severe headaches following the second automobile accident. Corio stopped treating with Dr. Pavez after the doctor told her that her memory deficits, difficulty finding words and mental fogginess were caused by her migraine medication. Corio had a ten-year history of migraines predating the July 2012 accident.
On July 3, 2013, Corio filed suit, naming as defendants Rainey, Rosedale Transport, Glenn Buick-GMC Trucks, LLC, and Progressive Marathon Insurance Company. She asserted claims of negligent operation and respondeat superior as well as claims for negligent hiring, training and supervision against Rosedale. She alleged Glenn Buick-GMC was liable for failure to inspect because her vehicle's airbag did not deploy in the accident. The record contains an email from Corio's attorney to David Rosenthal, an attorney advising NSIC, stating the lawsuit was filed in large part due to the PIP carrier's failure to pay medical bills within the one-year statute of limitations.
According to Corio, her injuries as a result of the accident included a traumatic brain injury, post-traumatic stress disorder, cognitive disorders and delays, migraines, glass in her left eye, a grade V separation of the AC joint of her left shoulder, a slap tear of the labrum in her left shoulder, a severed ulnar nerve in her left hand, blood clots in her right arm, joint dysfunction causing hip and low back pain, a left peroneal neuritis, three fractured ribs, anxiety and depression. She was hospitalized for thirty-one days and underwent surgery to repair her left shoulder and the ulnar nerve in her left hand. She received numerous other treatments including hundreds of injections, acupuncture, physical therapy, occupational therapy and psychological therapy. In August 2013, Corio consulted Dr. Christopher Allen who concluded she had a significant traumatic brain injury and post-traumatic stress.
Although Corio had provided some medical records to NSIC in May 2013, she did not make a settlement demand prior to filing suit. NSIC did not dispute the liability of its insureds for the injuries caused by the July 9, 2012 accident, but it did seek to determine the extent and seriousness of those injuries, in particular Corio's claim that she suffered a traumatic brain injury. It also sought to determine the extent to which her various injuries and symptoms were attributable to the accident and the extent to which they might be attributable to the subsequent April 2013 accident, to pre-existing conditions and to her alleged overuse of prescription medications. Another factor to be resolved was the potential liability of Glenn Buick-GMC for its alleged failure to inspect the airbag in Corio's vehicle.
In a telephone conversation on October 28, 2013, NSIC informed Corio's counsel that if her claims for traumatic brain and psychological injury were being pursued despite her apparently normal MRI and CT scans, NSIC would request to take Corio's deposition and have a neuro-psychiatric independent medical examination performed before the claims could be properly evaluated. On November 12, 2013, Corio's attorney emailed a demand to NSIC for the $1 million policy limits.
On December 26, 2013, Corio filed a motion to amend her complaint to assert claims of negligent infliction of emotional distress and to add bad faith claims under the Unfair Claims Settlement Practices Act, Kentucky Revised Statutes (KRS) 304.12-230, against NSIC, as Rosedale and Rainey's insurer, for allegedly undervaluing and/or unnecessarily delaying the resolution of her claims.
Corio underwent a second shoulder surgery on April 1, 2014. At this time, NSIC was investigating Corio's claims regarding the value of her lost wages and lost future earnings. NSIC took Corio's deposition in May 2014; it had been delayed both for the surgery and for her wedding and honeymoon.
NSIC retained Dr. Robert Granacher, a neuropsychiatrist, to perform a neurological independent medical examination of Corio in June 2014. Dr. Granacher concluded that Corio had not sustained a permanent traumatic brain injury. He opined that, at worst, she had suffered an uncomplicated concussion. He attributed her current symptoms to physician- and nurse-induced over-medication.
The parties participated in mediation on August 11, 2014. Corio demanded $5 million for the claims against Rosedale and Rainey and $4 million for NSIC's alleged bad faith. She also demanded $750,000 from Glenn Buick-GMC. NSIC offered $320,000. Corio countered with a demand of $2.999 million. Corio walked out of the mediation after NSIC raised its offer to $350,000, which Corio characterized as "lowball."
On January 23, 2015, Corio renewed her motion to amend her complaint as the original motion had not yet been addressed by the trial court. At this time, Corio settled her claims against Glenn Buick-GMC for $75,000. She filed her amended complaint containing the bad faith claims against NSIC on February 2, 2015.
On March 13, 2015, the trial court entered an agreed order of bifurcation, pursuant to which discovery on the bad faith claims was stayed until the final resolution of the underlying bodily injury claim.
On July 15, 2015, the trial court granted NSIC's insureds partial summary judgment on Corio's punitive damages and negligent hiring claims. On July 22, 2015, NSIC increased its reserve to $600,000 when Corio's medical expenses grew to $271,000.
In early August 2015, Corio started treatment at the Diamond Headache Clinic in Chicago, described by the appellee as the oldest headache clinic in the United States. Her treating physician at the clinic drew a causal connection between the July 2012 accident and Corio's headaches. A second mediation was scheduled for November 2015, but due to a scheduling conflict with one of Corio's attorneys, it was rescheduled for March 31, 2016. By that time, Corio's medical expenses had escalated to approximately $600,000, due in part to her treatment at the Diamond Headache Clinic. In response to the opinion of the physician at that facility and the significant increase in Corio's medical expenses, NSIC approved policy limits settlement authority. At the mediation, Corio presented a demand of $5 million. Ultimately, AIG, the excess insurer, settled Corio's claim for $1.5 million on September 20, 2016.
On April 24, 2017, the trial court lifted the discovery stay in the bad faith action. In anticipation of this, Corio had served NSIC with discovery requests on February 24, 2017. NSIC provided partial discovery responses on July 7, 2017.
On July 27, 2017, Corio sent NSIC a letter detailing purported deficiencies in the responses. The parties met in August 2017 to discuss the deficiencies and on August 28, 2017, Corio filed a motion to compel appropriate discovery responses. NSIC responded by requesting the court to deny the motion to compel in order to give NSIC time to move for summary judgment. The trial court directed NSIC to file the motion for summary judgment. Following full briefing and a hearing, the trial court granted the motion and thereafter signed an order tendered by NSIC. It also denied Corio's motion to compel. This appeal by Corio followed.
In reviewing a grant of summary judgment, our inquiry focuses on "whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law." Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996) (citing Kentucky Rules of Civil Procedure (CR) 56.03). Summary judgment may be granted 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 [or her] favor and against the movant." Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 483 (Ky. 1991) (internal quotation marks and citation omitted). "The record must be viewed in a light most favorable to the party opposing the motion for summary judgment and all doubts are to be resolved in his [or her] favor." Id. at 480. "An appellate court need not defer to the trial court's decision on summary judgment and will review the issue de novo because only legal questions and no factual findings are involved." Hallahan v. The Courier-Journal, 138 S.W.3d 699, 705 (Ky. App. 2004).
Corio argues that the grant of summary judgment to NSIC was fatally premature because she was not provided with an adequate opportunity to complete pretrial discovery, and that in any event summary judgment was improper because there were numerous material facts from which jurors could infer that NSIC acted unreasonably in its handling of her claim. More broadly, Corio posits that the fact-specific nature of bad faith claims renders them virtually impervious to resolution by summary judgment.
In order to state a cause of action against an insurer for bad faith, a plaintiff must establish the following three elements: "(1) The insurer must be obligated to pay the claim under the terms of the policy; (2) the insurer must lack a reasonable basis in law or fact for denying the claim; and (3) it must be shown 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." Kentucky Nat. Ins. Co. v. Shaffer, 155 S.W.3d 738, 742 (Ky. App. 2004) (quoting Wittmer v. Jones, 864 S.W.2d 885, 890 (Ky. 1993) (citations omitted)). In order to establish the third element, evidence is required that the insurer's conduct was outrageous, or exhibited reckless indifference to the rights of others. Hollaway v. Direct General Ins. Co. of Mississippi, Inc., 497 S.W.3d 733, 738 (Ky. 2016). The plaintiff bears the burden of establishing all three elements; in order to defeat a motion for summary judgment she must offer proof for all three. Id.
The first element of the bad faith claim required a showing that NSIC had a duty under the terms of the Rosedale Transport policy to compensate Corio. Under KRS 304.12-230, "an insurance company is required to deal in good faith with a claimant, . . . with respect to a claim which the insurance company is contractually obligated to pay." Indiana Ins. Co. v. Demetre, 527 S.W.3d 12, 26 (Ky. 2017) (quoting Davidson v. American Freightways, Inc., 25 S.W.3d 94, 100 (Ky. 2000)). This element of contractual obligation comprises two distinct questions of law: first, liability for the accident itself, that is, whether the July 2012 accident was a result of NSIC's insured's fault and, second, the extent and severity of the alleged injuries resulting from the accident. Hollaway, 497 S.W.3d at 738. Although NSIC admitted its insured's fault for causing the accident, it was not automatically compelled to accept responsibility for causing all Corio's claimed damages as well. Id. The Kentucky Unfair Claims Settlement Practices Act "only requires insurers to negotiate reasonably with respect to claims; it does not require them to acquiesce to a third party's demands." Id. at 739.
As our foregoing recitation of the facts indicates, Corio's injuries evolved over time and were the subject of considerable medical dispute, particularly the causal connection between the accident and a potential traumatic brain injury. Corio does not deny the record is replete with evidence that her injuries were by no means fixed and certain, with physicians such as Dr. Pavez and Dr. Granacher attributing her symptoms to over-medication. The impact of the rear-end collision in April 2013 and the potential liability of Glenn Buick-GMC were additional complicating factors. No genuine issue of material fact exists that NSIC was justified in contesting the extent of its liability. As the causation and extent of Corio's injuries was reasonably and legitimately contested by NSIC, the contractual obligation of NSIC to pay the claim was not clearly established and consequently the first element of a bad faith claim was not satisfied. Id.
Corio nonetheless argues that under Farmland Mut. Ins. Co. v. Johnson, 36 S.W.3d 368 (Ky. 2000), as modified (Feb. 22, 2001), the threshold question of whether a claim is fairly debatable is always a question of fact for the jury and cannot be appropriately resolved by summary judgment. Farmland at 376. Farmland involved a first-party insurance claim following the destruction by fire of commercial building. The owners alleged that the insurance company misrepresented the policy provisions, failed to conduct a reasonable investigation, failed to attempt to bring about a fair settlement of the claim and compelled them to initiate litigation by offering a settlement amount substantially less than the amount ultimately recovered. Id. at 372. The insurance company argued that a reasonable debate existed regarding the value of the loss and whether the building could be rebuilt or had to be replaced. Id. at 374.
In addressing this question regarding the claim, the Kentucky Supreme Court cited with approval a decision of the Supreme Court of Arizona which held that "whether a claim or the amount of a claim is fairly debatable is a question of fact for the jury and that the fact of a disputed amount does not relieve the insurer of its duty to handle the claim fairly." Id. at 376 (citing Zilisch v. State Farm Mutual Auto. Ins. Co., 196 Ariz. 234, 995 P.2d 276 (2000)).
Certainly, the fact that Corio's claim was debatable did not relieve NSIC of its duty to deal in good faith. "[A]lthough elements of a claim may be 'fairly debatable,' an insurer must debate the matter fairly." Id. at 375. Whether a claim is fairly debatable is certainly a question of fact for the jury but only when that issue is in dispute. No genuine issue of material fact exists that the extent of liability was legitimately contested by NSIC in this case. The fact that Corio's claim was fairly debatable is simply not in dispute. As we have already discussed, the case history is replete with conflicting and changing medical reports and unsettled issues relating to the apportionment of liability. There was no need for a jury to determine this settled issue.
We turn to the three aspects of the proceedings which Corio claims are evidence of bad faith on the part of NSIC and should have precluded the grant of summary judgment. First, she contends that the insurer improperly delayed payment of her claim, in direct contravention of KRS 304.12-230(6), which characterizes as an unfair claims settlement practice "[n]ot attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear[.]" As we have already discussed, the extent of liability for Corio's injuries did not become "reasonably clear" immediately following the accident. Corio nonetheless contends the four years which passed between the date of the accident and the payment of the claim raise a reasonable inference that NSIC acted in bad faith. But many of the delays were attributable to Corio herself and to the uncertainty surrounding her medical condition. For example, an email in the record dated seven months after the accident states Corio had not yet provided NSIC with any medical records or a settlement demand. Corio did not file suit until almost three months after her second automobile accident, and then sought to amend her complaint to assert bad faith claims against NSIC only two months after demanding the $1 million policy limits. The liability of Glenn Buick-GMC was not resolved until the settlement of February 2015. A delay of some four months preceding the final mediation was due to a normal rescheduling request by one of Corio's attorneys. Delays are not presumptively evidence of bad faith, especially when the type of conclusive medical evidence necessary to establish the extent of liability lies in the hands of the claimant, not the insurer.
Second, Corio claims as further evidence of bad faith that NSIC ignored its own lawyers' advice about the value of the claim. Initially, the lawyers recommended an offer in the range of $350,000 to $800,000. Corio rejected an offer of $350,000 at the first mediation conference. The attorneys continued to recommend a higher amount. Corio claims NSIC acted in bad faith when it entered the final mediation conference with an unchanged initial offering of only $350,000. But NSIC ultimately offered the $1 million policy limits at that conference in light of the new medical evidence from the Diamond Headache Clinic.
Third, Corio argues that NSIC ignored its own reserves in making settlement offers. At the time of the first mediation in August 2014, NSIC's reserve was set at $450,000. On July 22, 2015, NSIC increased its reserve to $600,000. These increases were made in response to Corio's mounting medical bills and the possibility that new medical evidence would support full liability. "We will not attribute changing positions as a result of new information or evidence to bad-faith failure to settle claims. Such a stance would stand contrary to our quest for truth and would likely lead to obfuscation in the early stages of accident investigations." Hollaway, 497 S.W.3d at 738.
Corio argues that the grant of summary judgment by the trial court was fatally premature because she was not allowed to complete discovery. The action was bifurcated, and discovery stayed on the bad faith claims on March 13, 2015, about nineteen months after Corio filed suit. The stay was imposed after the first unsuccessful mediation and the settlement of Corio's claims against Glenn Buick-GMC. The stay was lifted on April 24, 2017. NSIC provided partial discovery responses, including its entire case file, on July 7, 2017. Summary judgment was entered four months later, on November 8, 2017.
"[F]or summary judgment to be properly granted, the party opposing the motion must have been given adequate opportunity to discover the relevant facts. Only if that opportunity was given do we reach the issue of whether there were any material issues of fact precluding summary judgment." Suter v. Mazyck, 226 S.W.3d 837, 842 (Ky. App. 2007), as modified (July 13, 2007). On the other hand, the party opposing summary judgment "cannot rely on the hope that the trier of fact will disbelieve the movant's denial of a disputed fact, but must present affirmative evidence in order to defeat a properly supported motion for summary judgment." Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 481 (Ky. 1991) (internal quotation marks and citations omitted). The circuit court's decision that an ample amount of time has passed is reviewed on appeal for an abuse of discretion. Blankenship v. Collier, 302 S.W.3d 665, 668 (Ky. 2010).
Corio was provided with the entire case file before the trial court ruled on the summary judgment motion. The record before us contains numerous internal emails, memos outlining NSIC's settlement strategies and other documents detailing how NSIC proceeded in dealing with her claims. Corio argues that the court's action meant she was unable to take any depositions. It is unclear whose deposition she sought to take or how any information offered by a deponent from NSIC would cast light on her bad faith claims. She simply does not identify "specific examples of what discovery could have been undertaken that would have affected the outcome had it been conducted." Benton v. Boyd & Boyd, PLLC, 387 S.W.3d 341, 343-44 (Ky. App. 2012). Indeed, as we have already observed, the kind of medical evidence that would have supported a direct causal link between her various injuries and symptoms and the July 2012 accident would have been in her control, not that of NSIC. Thus, the trial court did not abuse its discretion in ruling on the summary judgment motion without allowing further discovery.
Corio also appealed the trial court's denial of her motion to compel production. She does not raise any specific arguments in her brief regarding this issue. We review the denial of a motion to compel production "as an evidentiary matter within the trial court's discretion. We will reverse only for an abuse of discretion. The trial court abuses its discretion when its decision is 'arbitrary, unreasonable, unfair, or unsupported by sound legal principles.' Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999) (citations omitted)." Curty v. Norton Healthcare, Inc., 561 S.W.3d 374, 378 (Ky. App. 2018). In light of the fact that the trial court determined NSIC was entitled to summary judgment on Corio's claims of bad faith, it would have been futile to order NSIC to comply with Corio's discovery demands.
Finally, Corio has also asked us to consider supplemental authority in the form of an opinion rendered after the filing of the briefs in this appeal. See Commonwealth ex rel. Landrum v. Dolt, Thompson, Shepherd & Conway, P.S.C., No. 2018-CA-000467-MR, 2019 WL 320510 (Ky. App. Jan. 25, 2019). In Landrum, parties in a contract dispute filed complaints against one another. Less than one month later, before any answer was filed, one party moved for summary judgment and a stay of discovery pending the resolution of the summary judgment motion. Summary judgment was entered resolving both consolidated cases and effectively denied the opposing party any opportunity whatsoever to conduct discovery. A panel of this Court deemed such a result "an improper use of summary judgment." Id. at *4. By contrast, Corio was provided with discovery in the form of the entire case file. Her arguments that further unspecified discovery would lead to more probative evidence of bad faith is speculative at best. "If . . . pure speculation were sufficient grounds for discovery, the scope would be limitless and the process neverending." Bennington v. Commonwealth, 348 S.W.3d 613, 625 (Ky. 2011).
As of the date this opinion is rendered, motions for discretionary review of Landrum are pending in the Kentucky Supreme Court. Case Nos. 2019-SC-000197-D and 2019-CA-000199-D. --------
For the foregoing reasons, the orders of the Fayette Circuit Court granting summary judgment and denying the motion to compel are affirmed.
ALL CONCUR. BRIEFS FOR APPELLANT: M. Austin Mehr
Philip G. Fairbanks
Erik D. Peterson
Elizabeth A. Thornsbury
Lexington, Kentucky BRIEF FOR APPELLEE: David W. Zahniser
Fort Mitchell, Kentucky