FRED ISAAC AND WENDY ISAAC v. STATE FARM INSURANCE COMPANY
Annotate this Case
Download PDF
RENDERED:
AUGUST 10, 2001; 2:00 p.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2000-CA-002416-MR
FRED ISAAC AND WENDY ISAAC
APPELLANTS
APPEAL FROM ROWAN CIRCUIT COURT
HONORABLE WILLIAM B. MAINS, JUDGE
ACTION NO. 00-CI-00079
v.
STATE FARM INSURANCE COMPANY
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
JOHNSON, MILLER, AND SCHRODER, JUDGES.
SCHRODER, JUDGE:
The Isaacs appeal from a declaratory judgment
from the Rowan Circuit Court claiming the trial court’s findings
on the habitability of their home went beyond what it was asked
to decide.
In addition, the Isaacs assert the judgment does not
have a res judicata effect on their future claims of personal
injury and bad faith with regard to toxic mold and the repair of
their home after a fire.
We disagree and affirm.
On June 4, 1994, a fire damaged the home of Fred and
Wendy Isaac (the “Isaacs”).
At the time of the fire, the Isaacs
had homeowner’s insurance with State Farm Insurance Company
(“State Farm”).
State Farm paid to have the home repaired, and
also paid for the Isaacs’s living expenses for the three months
they were forced to live outside their home.
After the repairs
were made and the Isaacs moved back into the home, they
discovered that water had been left standing in the air vents
beneath the floor.
State Farm was notified, and its contractor
proceeded to clean up the water.
For the next five years, the Isaacs had no contact with
State Farm.
However, between 1994 and 1999, the Isaacs claim
they began suffering from physical problems such as difficulties
in breathing, flu like symptoms, and rashes.
In 1999, Fred Isaac
was told his home may have a potential toxic mold problem, and as
a result, the Isaacs informed State Farm and moved out of their
home.
The Isaacs employed William Croft, a veterinarian, to
inspect and test their home.
them under a microscope.
Croft collected samples and tested
He found evidence of the toxic mold
stachybotrys, however, he did not submit any of the samples to a
laboratory and said his conclusions were based solely on his
visual inspection.
State Farm employed Tencon, Inc., a technical
environmental consulting firm, to test the home for toxic mold.
Tencon inspected the home twice, and on both occasions, found
there was no toxic mold present in the home.
The first
inspection was done by Tencon’s environmental expert Karen
Lenihan.
Although she observed discolored areas on the walls and
ceilings, she did not believe it was due to the presence of mold
or fungus, but was a result of smoking or a former roof leak.
She noted a new roof had recently been installed on the home.
-2-
Her samples were submitted to the laboratory, and it indicated a
very low concentration of fungi and bacteria.
Tencon’s second
inspection essentially came to the same result, which was no
finding of the fungi stachybotrys or any other type of mold or
fungi.
The samples from the second inspection were tested in a
separate laboratory.
These two tests led Tencon’s president,
Mary Malotke, to testify that she believed, with a reasonable
degree of scientific probability, that no toxic mold existed that
would prevent the Isaacs from living in their home.
The last piece of evidence the trial court used was a
deposition from Karen Lee Early, an industrial hygienist.
Ms.
Early was critical of Tencon’s testing procedures, and is of the
opinion that Tencon should have taken its samples from different
areas of the house.
Nevertheless, Ms. Early performed no tests
on the Isaacs’s home.
The Isaacs filed a verified petition for declaration of
rights in the Rowan Circuit Court on March 10, 2000, and they
amended it on April 27, 2000.
2000.
A hearing was held on August 15,
The court heard testimony from the Isaacs and State Farm
and determined the most credible evidence was the test results
submitted by Tencon, Inc.
Therefore, the court found the toxic
stachybotrys fungi did not exist in the home.
The court strongly
suspected the roof the Isaacs had recently placed on their house
in 1999 was the culprit for the apparent water stains.
In
addition, the court found the Isaacs’s expert, William Croft, was
not credible because he never submitted his findings for a
laboratory analysis.
As a result, the trial court concluded
-3-
State Farm did not owe the Isaacs “for any further losses,
including living expenses” under the policy in question.
The Isaacs’s first contention is that the trial court
went beyond what was requested in the petition for declaratory
judgment.
At the end of its judgment, the court stated that “the
policy in question does not provide coverage to the plaintiff for
any further losses, including living expenses.”
The Isaacs claim
this statement is ambiguous and that the court is making a
judgment that exceeds the purpose of the declaratory judgment.
We disagree.
It is well established that a declaratory judgment
should not go beyond the pleadings and questions being asked of
it, and they do so when “they embrace possible controversies that
do not now or may never exist.”
Louisville and Jefferson County
Metropolitan Sewer District v. Douglass Hills Sanitation
Facility, Ky., 592 S.W.2d 142, 144 (1979).
However, in the case
at hand, we believe the court is explicitly addressing the policy
and its applicability to the alleged toxic mold.
The statement
was simply saying that since there was no evidence of toxic mold,
then the policy does not cover damages or actions resulting from
its alleged existence.
We believe the trial court’s use of the
words “further losses” was meant to address different aspects of
the policy, such as replacement costs to the home and other
losses normal to homeowner’s policies.
Therefore, since no toxic
mold was found, the trial court was correct in ruling the policy
did not cover the Isaacs’s additional nine months of living
expenses or new theories of recovery for damages caused by toxic
mold.
-4-
The Isaacs’s second argument is that State Farm’s
assertion that the declaratory judgment has a res judicata effect
on their new causes of actions is wrong because declaratory
judgments do not have a res judicata or collateral estoppel
effect.
We disagree.
Declaratory judgments that have “pleadings
filed and the practice resorted to by the parties have in reality
converted the case into an ordinary action” will be considered as
an “ordinary” trial.
Commonwealth v. Givens, Ky., 299 S.W.2d
799, 802 (1957).
Thus, the declaratory judgment will have a res
judicata effect.
Id. at 802.
In the present case, like Givens,
there were pleadings and each party was given an opportunity to
present their evidence during the hearing.
In addition, each
side was allowed to produce and have an expert witness testify on
their behalf.
Therefore, since both parties had a full
opportunity to litigate their case, we hold the declaratory
judgment in the present case can have a res judicata and
collateral estoppel effect.
State Farm argues the Isaacs may not bring additional
claims for personal injury and bad faith based on the presence of
toxic mold because the claims should have been asserted in the
first cause of action which only asked for living expenses.
State Farm believes res judicata prevents the Isaacs from
bringing the two claims.
We agree with State Farm that the
Isaacs’s claim for personal injuries resulting from toxic mold is
barred under res judicata.
To prove a cause of action under res
judicata, it must be shown that a previous judgment on the merits
between the same parties exists and that the concerns of the
previous cause of action are the same as those presently
-5-
asserted.
Napier v. Jones, Ky. App., 925 S.W.2d 193 (1996).
See
also City of Louisville v. Louisville Professional Firefighters
Assn., Ky., 813 S.W.2d 804 (1991).
See also Newman v. Newman,
Ky., 451 S.W.2d 417 (1970).
In the case at hand, the first two elements of res
judicata are fulfilled.
The declaratory judgment put the Isaacs
in opposition to State Farm, and the case was decided on its
merits when the court ruled there was no toxic mold present in
the Isaacs’s home.
The only question is whether the third
element, identity in the causes of action, is met.
State Farm argues the third criteria was met because
the subsidiary rule of res judicata prevents the Isaacs from
splitting their cause of action.
S.W.2d 123 (1985).
Egbert v. Curtis, Ky. App., 695
The subsidiary rule in Egbert, 695 S.W.2d at
124 states:
Stated another way the subsidiary rule makes
res judicata applicable not only to the
issues disposed of in the first action, but
to every point which properly belonged to the
subject of the litigation in the first action
and which in the exercise of reasonable
diligence might have been brought forward at
the time.
Using this definition, we believe the Isaacs should have brought
forward their personal injury and bad faith causes of action when
their other causes of action against State Farm were brought.
Both essentially derive from an issue that was litigated and
decided in the declaratory judgment, i.e., whether there was
toxic mold.
The declaratory judgment established that there
presently was no toxic mold in the Isaacs’s home.
To determine
this, they used evidence gathered and tested in a laboratory by
-6-
experts.
The Isaacs argue their second cause of action is a
different issue because it involves determining whether toxic
mold existed prior to the finding that there currently was no
toxic mold.
However, we disagree that there is a difference
because the claims appear to be determinable by the same
evidence; thus the two claims should have be asserted in the
first cause of action.
The evidence used to determine the
presence of toxic mold during the declaratory judgment would have
been the same evidence used to determine if mold had been present
from 1994 to 2000.
As a result, since the additional claims
should have been brought in the original action, the Isaacs are
barred under the doctrine of res judicata from bringing the two
claims.
While the doctrine of res judicata does bar the Isaacs
from bringing further action against State Farm for damages
resulting from the alleged toxic mold, we believe the doctrine of
collateral estoppel is also applicable in the current case.
Although collateral estoppel and res judicata are very similar in
nature, the effect of collateral estoppel is different from that
of res judicata:
The basic distinction between the doctrines
of res judicata and collateral estoppel, as
those terms are used in this case, has
frequently been emphasized. Thus, under the
doctrine of res judicata, a judgment ‘on the
merits’ in a prior suit involving the same
parties or their privies bars a second suit
on the same cause of action. Under the
doctrine of collateral estoppel, on the other
hand, such a judgment precludes relitigation
of issues actually litigated and determined
in the prior suit, regardless of whether it
was based on the same cause of action as the
second suit.
-7-
City of Louisville, 813 S.W.2d at 807, quoting Lawlor v. National
Screen Service Corporation, 349 U.S. 322, 75 S. Ct. 865, 99 L.
Ed. 1122 (1955).
Kentucky adopted the use of collateral estoppel
or claim preclusion in Sedley v. City of West Buechel, Ky., 461
S.W.2d 556, 559 (1970).
Collateral estoppel “serves to prevent
parties from relitigating issues necessarily determined in a
prior proceeding.”
600 (1980).
Gregory v. Commonwealth, Ky., 610 S.W.2d 598,
Thus, even when the “second action between the same
parties is upon a different claim or demand,” the prior judgment
acts as an estoppel to all theories or claims revolving around
issues already litigated.
City of Louisville, 813 S.W.2d at 807.
We believe the doctrine of collateral estoppel prevents
the Isaacs from bringing the second cause of action because the
issue about the presence of toxic mold has already been litigated
and any theory of recovery or claim for damages should have been
presented in the original suit.
Both sides had an opportunity to
prove the toxic mold existed and any problems arising thereafter.
Therefore, if the Isaacs were permitted to file a new claim for
relief and then be allowed to establish the mold existed between
1994 and 1999, they would essentially be getting another chance
to prove an issue that has already been litigated.
The doctrine
of collateral estoppel prohibits a new theory of liability on the
same facts, thus, the Isaacs cannot bring the additional claims.
For the foregoing reasons, the judgment of the Rowan
Circuit Court is affirmed.
ALL CONCUR.
-8-
BRIEF FOR APPELLANTS:
BRIEF FOR APPELLEE:
Robert E. Reeves
Lexington, Kentucky
Christopher A. Conley
Ashland, Kentucky
-9-
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.