DUNN (SHERWIN), ET AL. VS. KENTUCKY FARM BUREAU MUTUAL INSURANCE COMPANY
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RENDERED: MARCH 27, 2009; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2008-CA-000718-MR
SHERWIN AND DONNA DUNN
v.
APPELLANTS
APPEAL FROM WOLFE CIRCUIT COURT
HONORABLE JOHN DAVID CAUDILL, JUDGE
ACTION NO. 06-CI-00136
KENTUCKY FARM BUREAU
MUTUAL INSURANCE COMPANY
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CLAYTON AND STUMBO, JUDGES; BUCKINGHAM,1 SENIOR
JUDGE
STUMBO, JUDGE: Sherwin and Donna Dunn appeal the grant of summary
judgment in favor of Kentucky Farm Bureau Mutual Insurance Company (KFB)
that dismissed their class action claims. The Dunns argue that they are entitled, as
a matter of law, to interest on the money KFB paid out to them pursuant to a
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Senior Judge David C. Buckingham sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statutes
(KRS) 21.580.
homeowners’ insurance claim and that they should be allowed to pursue a class
action claim as to this issue.
The facts are not in dispute. On December 22, 2005, the Dunns’
mobile home caught fire. The mobile home was insured by KFB. On January 5,
2006, the Dunns submitted a proof of claim form to KFB. KFB investigated the
claim and on May 12, 2006, made a payment on the claim. Further payments were
made on June 8, 2006, and July 3, 2006. No payments or offers of settlement were
made within the 30-day window set forth in KRS 304.12-235.
The Dunns filed the underlying lawsuit individually and on behalf of
three classes of persons that they alleged would have a claim for interest under
KRS 304.12-235.2 The three named classes were:
A. All first party insureds who, within the last fifteen
years, suffered a loss covered by their KFB policy,
furnished KFB with a notice and proof of claim as
required by the policy, and who received a settlement or
claim payment from KFB, but who were not paid 12%
interest on the ultimate settlement, and where KFB did
not attempt to settle their claim within thirty days of
being furnished the aforesaid notice and proof of claim.
B. All first party insureds and their health care providers
who, within the last fifteen years, suffered a loss covered
by their KFB policy (or in the case of health care
providers, furnished health care for an injury covered by
PIP or Added Reparations benefits), furnished KFB with
a notice and proof of claims as required by the policy,
and who have not yet received a settlement or claim
payment from KFB, and where KFB did not attempt to
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Appellant also argued in the alternative that KRS 14-400 was applicable but conceded during
oral argument that the statute was not.
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settle their claim within thirty days of being furnished the
aforesaid notice and proof of claim.
C. All health care providers who provided health care
under PIP or Added reparations benefit coverage
applicable to automobile policies issued by KFB, and
who, within the last fifteen years, furnished KFB with a
notice and proof of claim as required by the policy, and
who received a settlement or claim payment from KFB,
but who were not paid 12% interest on the ultimate
settlement, and where KFB did not attempt to settle their
claims within thirty days of being furnished the aforesaid
notice and proof of claim.
Kentucky Farm Bureau filed a motion to dismiss pursuant to Civil
Rule 12.02(f). The trial court dismissed the class action claims and all of the
individual claims except the one dealing with payment of interest pursuant to
Kentucky Revised Statute (KRS) 304.12-235.
KRS 304.12-235 states:
(1) All claims arising under the terms of any contract of
insurance shall be paid to the named insured person or
health care provider not more than thirty (30) days from
the date upon which notice and proof of claim, in the
substance and form required by the terms of the policy,
are furnished the insurer.
(2) If an insurer fails to make a good faith attempt to
settle a claim within the time prescribed in subsection (1)
of this section, the value of the final settlement shall bear
interest at the rate of twelve percent (12%) per annum
from and after the expiration of the thirty (30) day period.
(3) If an insurer fails to settle a claim within the time
prescribed in subsection (1) of this section and the delay
was without reasonable foundation, the insured person or
health care provider shall be entitled to be reimbursed for
his reasonable attorney’s fees incurred. No part of the
fee for representing the claimant in connection with this
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claim shall be charged against benefits otherwise due the
claimant.
The case progressed with the Dunns’ filing of a motion for summary
judgment, arguing that since KFB made no attempt to settle the claim until May
12, 2006, when they made the first payment, KRS 304.12-235 requires some
interest to be paid. In other words, the statute makes it mandatory to pay interest
when no attempt is made to pay the claim within 30 days. The trial court overruled
the motion on the grounds that there is a genuine issue of material fact as to
whether KFB acted in good faith to settle the claim.
The Dunns filed a second motion for summary judgment and
stipulated that they would put on no evidence challenging KFB’s good faith. KFB
responded with its own motion for summary judgment arguing that since the
Dunns will not put forth any evidence of bad faith, summary judgment should be
granted in KFB’s favor. The trial court granted summary judgment for KFB and
denied the Dunns interest. This appeal followed.
The Dunns first argue that because there was no attempt to make a
settlement until more than 30 days after submission of their claim, the good faith
exception in KRS 304.12-235 does not apply. KFB points to the investigation it
began before the Dunns submitted their proof of loss. One of the pieces of
information it acquired during the investigation was that the Dunns had been in
financial trouble and that some of the home’s contents had been removed prior to
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the fire. Additionally, KFB notes that when their representative attempted to take
the Dunns’ statements under oath as provided for in their policy, it was delayed
first due to scheduling problems and then at the request of the Dunns’ counsel. It
then took another month for the statement to be transcribed and signed by the
Dunns. Finally, KFB notes the stipulation that the Dunns would not attempt to
introduce evidence of bad faith. The first payment was in the amount of
$78,715.86 and was made on the same day the statements were received.
Appellants’ argument is that under KRS 304.12-235, the only time
that interest is payable on a claim is when the claim is neither paid nor a good faith
attempt to settle is made within 30 days of submission of a claim. Here, the Dunns
stipulated that no evidence of bad faith was forthcoming, which essentially means
that if a claim is submitted and it is not paid for any reason other than good faith,
interest is payable. While an interesting argument, were we to accept it, the bad
faith provision of subsection (2) would be completely superfluous and the statute
would have the same effect as it would if it provided that interest is payable any
time the claim is not paid within 30 days of submission of proof of loss. The trial
court did not err in granting the motion for summary judgment.
The Dunns also argue that the class action aspect of their case was
improperly dismissed. As stated above, the trial court dismissed the class action
pursuant to a CR 12.02 motion to dismiss filed by KFB. “Under CR 12.02 a court
should not dismiss for failure to state a claim unless the pleading party appears not
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to be entitled to relief under any state of facts which could be proved in support of
his claim.” Weller v. McCauley, 383 S.W.2d 356, 357 (Ky. 1964) (Emphasis
added). Also, the class action portion of the complaint was dismissed before the
Dunns could file a motion to certify the case as a class action and before a hearing
could be held to present evidence regarding the class action.
As a general matter, we would note that issues regarding class action
certification are not properly before the trial court until the plaintiffs have filed
their motion for class certification. Davis v. Department of Revenue of Finance
and Admin. Cabinet, 197 S.W.3d 557, 565 (Ky. App. 2006) (reversed on other
grounds). Based on this precedent, it would be within our power to remand this
case in order for the Dunns to file their motion for class certification regarding all
three classes; however, our review of the complaint convinces us that the trial court
properly granted the motion to dismiss.
A threshold issue regarding class actions is a plaintiff’s standing to
sue on behalf of a class of people. “To have standing to sue as a class
representative it is essential that a plaintiff must be a part of that class, that is, he
must possess the same interest and suffer the same injury shared by all members of
the class he represents.” Schlesinger v. Reservists Committee to Stop the War, 418
U.S. 208, 94 S.Ct. 2925, 14 L.Ed.2d 706 (1974).
Although it is unclear why the lower court dismissed all of the class
action claims, we note that the Dunns are not members of the second and third
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classes they have identified. They do not have insurance claims pending against
KFB, nor are they health care providers. Even though the Dunns had not yet filed
their motion for class action certification, it was proper for the trial court to dismiss
these two classes from the case based on their failure to plead facts that place them
within the classes.
The class description of the first class established a possible defined
class to which the Dunns could have belonged, to wit: the class of those who
received a payment from KFB, but did not receive interest pursuant to KRS
304.12-235. However, since we have determined that their claim has no merit as
discussed herein, there is no basis for a class action remaining.
For the foregoing reasons, we affirm the summary judgment.
ALL CONCUR.
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BRIEFS FOR APPELLANTS:
BRIEF FOR APPELLEE:
M. Austin Mehr
Timothy E. Geertz
Lexington, Kentucky
Michael D. Risley
Joseph L. Hamilton
Marjorie A. Farris
Louisville, Kentucky
ORAL ARGUMENT FOR
APPELLANTS:
M. Austin Mehr
Lexington, Kentucky
Michael J. Schmitt
Paintsville, Kentucky
Marcia L. Wireman
Jackson, Kentucky
ORAL ARGUMENT FOR
APPELLEE:
Michael D. Risley
Louisville, Kentucky
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