RENDERED: MARCH 22, 2024; 10:00 A.M. NOT TO BE PUBLISHED
Commonwealth of Kentucky Court of Appeals
NO. 2023-CA-0214-MR
TERRI WALLER APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT v. HONORABLE SUSAN GIBSON, JUDGE ACTION NO. 20-CI-003669
STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY APPELLEE
OPINION REVERSING AND REMANDING
** ** ** ** **
BEFORE: ACREE, COMBS, AND ECKERLE, JUDGES.
ECKERLE, JUDGE: Appellant, Terri Waller (“Waller”), appeals an order
granting summary judgment in favor of Appellee, State Auto Property and
Casualty Insurance Company (“State Auto”). After our de novo review of the
issues presented, we reverse and remand for factual findings. APPELLATE ERRORS
We begin with Waller’s counsel’s appellate errors. This case joins an
expanding list of cases where a practitioner has failed to comply either with the
Kentucky Rules of Appellate Procedure (“RAP”), or the predecessor appellate
rules formerly in the Kentucky Rules of Civil Procedure (“CR”). See, e.g.,
Hamilton v. Milby, 676 S.W.3d 42 (Ky. App. 2023); French v. French, 581 S.W.3d
45 (Ky. App. 2019); Prescott v. Commonwealth, 572 S.W.3d 913 (Ky. App. 2019);
and Hallis v. Hallis, 328 S.W.3d 694 (Ky. App. 2010).
Here, Waller’s counsel’s mistakes began early, with the notice of
appeal. Waller’s counsel initially listed the Honorable Susan Gibson, the Trial
Court Judge who authored the order on appeal, as an appellee. See RAP 2(A)(2)
(“[A]ll parties to the proceedings from which the appeal is taken, except those who
have been dismissed in an earlier final and appealable order, shall be parties before
the appellate court.”). Following a show cause order issued by this Court, Waller’s
counsel recognized his improper inclusion of non-parties and moved to dismiss
Judge Gibson from the appeal. We granted the motion.
Next, a prehearing conference order was entered on March 30, 2023,
directing Waller’s counsel to file a designation of evidence within ten days. See
RAP 24(B)(1)(b). Waller’s counsel did not file the designation of evidence within
ten days. Instead, Waller’s counsel filed the designation on April 17, 2023, some
-2- seven days late. Three days later, Waller’s counsel filed in this Court a motion
styled “Motion of Appellant for Order Regarding Her Designation of Evidence
Filed with the Circuit Court Clerk on 04/17/23.” In that motion, Waller’s counsel
gave two reasons for his failure to file a timely designation of record: (1) the RAP
was newly adopted; and (2) storms in the area had disrupted internet service at
counsel’s office. This Court treated Waller’s motion as a request for additional
time to file Waller’s designation of record, which is what should have been filed,
and granted the same.
Waller’s counsel next requested a 15-day extension of time to file
Waller’s opening, appellant’s brief. Waller tendered a brief within the requested
extension of time. This Court granted the motion for extension and ordered the
tendered brief to be filed.
While the foregoing extension motion was not in error, some ten days
after tendering the brief, Waller’s counsel moved this Court to permit Waller to file
an amended brief due to briefing improprieties Waller’s counsel subsequently
discovered. Waller’s counsel averred that he realized there were over a dozen
errors, largely involving citations to the record. This Court granted the motion,
struck from the record Waller’s original opening brief, and ordered the amended
appellant’s opening brief to be filed in the record.
-3- Though somewhat corrected, the amended, appellant’s opening brief
still contains substantial errors. For example, RAP 31(A)(1)(c) requires briefs to
use a font “no smaller than 12-point set at standard width.” Waller’s Statement of
Points and Authorities appears to contain font smaller than 12-point set at standard
width. Continuing, RAP 31(E)(1) requires citations to Kentucky cases reported
after June 1886 to be in a particular style that includes a parenthetical indicating
the court that rendered the decision and the year in which it was rendered. Many
of Waller’s citations do not comport with RAP 31(E)(1).
RAP 32(A)(3) requires an appellant’s, opening brief to contain a
statement of the case “with ample references to the specific location in the record
supporting each of the statements contained in the summary.” Waller’s opening,
appellant’s brief contains roughly 50 citations to the record in her 13-page
statement of the case, which equates to an average of five citations per page.
While an average of five citations per page may suffice to be “ample,” it is
noteworthy here that some paragraphs contain no citations to the record. More
problematic, though, are that many of the citations are not “specific” as they
reference multiple pages, i.e., footnote 19 references almost 100 pages of record
when arguing “the policy language is misquoted by State Auto,” footnote 18
references almost 80 pages of record, footnote 10 references 13 pages of record,
footnote 21 references 22 pages of record, and so forth.
-4- And some critical statements contain no supporting citation, such as
Waller’s statement that the Trial Court sustained State Auto’s summary judgment
motion. This reference is to the order that is being appealed, yet it contains no
citation to where this order is contained within the hundreds of pages and multiple
volumes of record.
The latter error becomes more glaring when coupled with Waller’s
failure to comply with RAP 32(A)(4) and (7). RAP 32(A)(4) requires a
preservation statement at the beginning of the argument section of an appellant’s
opening brief. That statement should contain a reference to the record showing
whether and how the appellate issue is properly preserved for review. Strict
compliance is mandated, as our Supreme Court recently reiterated:
We have strictly mandated compliance with this rule since its inception under the prior Kentucky Rules of Civil Procedure. Skaggs v. Assad, By & Through Assad, 712 S.W.2d 947, 950 (Ky. 1986) (citing CR 76.12(4)(c)(iv)) (“It goes without saying that errors to be considered for appellate review must be precisely preserved and identified in the lower court.”). RAP 32(A)(4) does not distinguish between this Court and the Court of Appeals when prescribing the organization and contents of an appellant’s opening brief. The failure of an appellant’s brief to conform to the appellate rules justifies the striking of the brief under RAP 31(H)(1).
-5- Gasaway v. Commonwealth, 671 S.W.3d 298, 310 (Ky. 2023).1
Additionally, RAP 32(A)(7) requires an appellant’s opening brief to
contain an appendix “that conforms with section (E) of this rule.” RAP
32(E)(1)(a) requires an appellant to attach to its appendix first an appendix index
listing all items in the appendix, followed immediately by “the judgment, opinion,
or order under review . . . so that it is most readily available to the court.” The
order being appealed does not immediately follow the appendix index here,
though. In fact – the order is not in the appendix at all.
Waller’s amended, opening brief wholly fails to comply with this rule.
Pursuant to Gasaway, these substantial failures could justify striking Waller’s
appellate brief. 671 S.W.3d at 310. See also RAP 31(H)(1). Or, we could elect to
review the claims without striking the brief. Gasaway, 671 S.W.3d at 311. We
reluctantly choose the latter as State Auto has not raised any issues with the
briefing, the summary judgment issues are relatively straightforward, and the Trial
Court’s Order frames the issues well, though we ultimately review those issues de
novo. We caution counsel that future, repeated errors may not be countenanced
and may result in sanctions. See RAP 10 and RAP 31(H).
1 The Supreme Court ultimately elected to refrain from imposing a sanction for multiple reasons, with the Court noting that the case was on discretionary review and “the Court of Appeals urged this Court to consider the applicability of Section 10 of the Kentucky Constitution.” Id. at 311.
-6- BACKGROUND
On or about June 26, 2018, Waller’s home allegedly suffered a
casualty when a tree fell on the rear portion of her house’s roof. Waller was out of
town and learned about the incident from a neighbor. According to Waller, she
had a tree service remove the tree, and that company concluded that any damage
was within Waller’s homeowner’s insurance deductible. Waller’s Amended
Complaint alleges that she verbally notified State Auto at some point, although she
does not specify the date. Waller admitted in her deposition that she was unsure if
she called her insurance agency and notified it about the June 26, 2018, incident.
An e-mail in April of 2019 from Andrew Reilmann, an insurance adjuster with
State Auto, relating to a separate incident that later occurred to the front of the
house in 2019,2 indicated Waller may have called about the June 26, 2018,
incident, but elected not to make a claim:
Mrs. Waller, I cannot include the damage to the interior or rear of the home on this claim, as it did not occur on the same date of loss. I understand you called in a claim last year, and it did not get entered. The only was [sic] for SA to provide coverage is for you to contact your agent, and enter another claim for the date of loss that the damage to the rear of the home occurred. That would be another claim, and another wind and hail deductible.
2 Waller claims that when Reilmann inspected the house, he commented to her that the rear roof was a “rubber” roof that would last “forever.”
-7- Regardless of any notice from Waller to State Auto in 2018, she
admitted that she did not make an insurance claim until June of 2020, because she
did not believe the damage exceeded the deductible. It is undisputed that no one
from State Auto came to Waller’s home to inspect the damage in 2018. Waller did
not have “a roofer or anybody else go up there and take a look at [her] roof to see if
there were any problems” in 2018. Waller Deposition p. 17. Waller claimed the
tree removal company saw “no visible damage” on the roof.
And, in spite of the information in the April 2019-e-mail from
Reilmann about “damage to the interior or rear of the home,” Waller claimed in her
deposition that it was not until April or May of 2020 that she started having or
noticing leaking from the rear roof. She allegedly noticed water coming in the
electrical area and the light in the laundry room, which is in the downstairs portion
of her house. Waller supports this claim by a statement in one of her affidavits that
she had a home inspection for an appraisal in July of 2019, and the appraisal did
not find any leaks.
Waller claims that it was not until after the April 2020, leaking ceiling
that she inspected the upstairs portion of her house, called in two professionals, and
had a tarp placed on the rear roof. Danny Colvin, a roofer with All Star
Construction, swore an affidavit in the instant case. Colvin inspected the roof in
May of 2020 and found two damaged places where water was leaking through the
-8- decking under the roof and into the interior of the home. Colvin stated that Waller
provided photos of the June 26, 2018, incident, along with photos from April 10,
2019, where Reilmann inspected the roof for the separate incident. Colvin
believed these photos showed that the roof had been damaged on June 26, 2018,
and a “delayed onset” occurred where the hole in the roof became larger and larger
over time, ultimately leading to water damage to the interior of the home.
Colvin averred that:
It would cost more now to do the repairs than what it would have cost had the repairs been done 04/10/19. Based on the history and on roofing probability, the damage to the interior walls and carpet of the home of Terri Waller had not yet occurred as of 04/10/19.
Following Colvin’s inspection, Waller did not contact State Auto in
May of 2020. Waller claims that she had homeowner’s insurance through another
company at that point and needed guidance on the manner in which she should
proceed. She contacted a personal adjuster, Brian Elmore, who inspected the home
on May 22, 2019. Waller claims Elmore may have contacted State Auto soon
thereafter. Regardless, Elmore recommended Waller contact an attorney, who, on
June 22, 2020, gave notice to State Auto prior to initiating this lawsuit.3 Waller’s
attorney’s e-mail to State Auto avers, “This is the first notice you have had of the
3 The terms of the homeowner’s insurance policy required any legal actions be initiated within two years of the occurrence, thus the hastily-filed, original Complaint.
-9- 06/26/18 claim[,]” though the e-mail also notes that there may be factual errors
given the newness of the case to the attorney and the need to file an action within
two years per the insurance contract’s terms.
At the Circuit Court, the case proceeded with discovery, and State
Auto twice filed motions for summary judgment. The Circuit Court denied the
first motion because it found genuine issues of material fact existed with respect to
whether State Auto suffered substantial prejudice from a delay in notice, and to
whether State Auto delayed in providing an inspection for coverage. However, the
Circuit Court granted the second, renewed motion,4 this time holding that there
were no genuine issues of material fact, and that State Auto had demonstrated that
as a matter of law it was entitled to judgment because it had proven Waller did not
comply with the prompt notice provision and, further, that State Auto was
prejudiced by this failure to notice the loss promptly. Waller timely appealed.
Additional facts are discussed as necessary below.
4 This motion relied in part on a March 14, 2022, signed affidavit from Amanda Heeke, a personal lines manager for Hyland Insurance Agency (“Hyland”), who had reviewed the agency’s files regarding any notices made or claims filed by Waller regarding the 2018 and 2019 losses. Heeke averred that “Ms. Waller did not report a claim for property damage to Hyland for a June 26, 2018, loss.” She also averred that Waller contacted Hyland on September 3, 2019, “regarding a potential insurance claim related to claimed tree and storm damage that occurred in 2018 including new damage she discovered upstairs, but she never requested Hyland to formally present any such claim to State Auto.”
-10- ANALYSIS
The issue in this case principally revolves around the notice-prejudice
rule, which alleviates a liability insurer from adjusting and/or defending an
otherwise covered occurrence if the terms of the policy require prompt notice, such
prompt notice was not given by the insured, and the insurer can demonstrate
prejudice from the delay. Waller’s appellate issues largely involve the giving of
notice. She presents multiple, alternative arguments. First, she argues that under
the notice-prejudice rule, an insured should not have a “covered occurrence”
requiring “notice” to her insurer until the insured is aware that she has a claim in
excess of her deductible. Waller argues that because her deductible was high, she
did not file a claim with State Auto about the June 26, 2018, occurrence until she
realized she had a covered occurrence in excess of her deductible. Next, Waller
claims that her alleged, verbal notice of the loss to her insurance agent in 2018
satisfied the insurance contract’s terms. Additionally, Waller asserts that she had
no loss of which to provide notice until May of 2020, because the damages were a
result of an insidious onset. State Auto counters that the notice was not promptly
given and that it was prejudiced by the delay.
We hold that pursuant to the terms of the insurance contract, there
remains a genuine issue of material fact regarding the timing of the notice to State
Auto of the loss. Thus, we reverse and remand for further proceedings.
-11- STANDARD OF REVIEW
This appeal involves a grant of summary judgment. The summary
judgment standard of review is well-established:
“[t]he standard of review on appeal of a summary judgment is whether the circuit judge correctly found that there were no issues as to any material fact and that the moving party was entitled to a judgment as a matter of law.” Pearson ex rel. Trent v. Nat’l Feeding Systems, Inc., 90 S.W.3d 46, 49 (Ky. 2002). Summary judgment is only proper when “it would be impossible for the respondent to produce any evidence at the trial warranting a judgment in his favor.” Steelvest, Inc., v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). In Steelvest, the word “‘impossible’ is used in a practical sense, not in an absolute sense.” Perkins v. Hausladen, 828 S.W.2d 652, 654 (Ky. 1992). In ruling on a motion for summary judgment, the court is required to construe the record “in a light most favorable to the party opposing the motion . . . and all doubts are to be resolved in his favor.” Steelvest, 807 S.W.2d at 480. A party opposing a summary judgment motion 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. Id. at 481.
Phelps v. Bluegrass Hosp. Mgmt., LLC, 630 S.W.3d 623, 627 (Ky. 2021) (citing
Ryan v. Fast Lane, Inc., 360 S.W.3d 787, 789-90 (Ky. App. 2012)) (alterations and
error in original). Our appellate review involves only issues of law; thus, our
review is de novo. Shelton v. Kentucky Easter Seals Soc., Inc., 413 S.W.3d 901,
905 (Ky. 2013).
-12- I. Notice-Prejudice Rule
The notice-prejudice rule allows insurance companies to avoid
adjusting or defending otherwise covered claims on liability, occurrence policies if
an insured does not promptly notice the insurance company of a covered
occurrence and the insurance company demonstrates that it was prejudiced by the
untimely notice. The rule was adopted in Jones v. Bituminous Casualty
Corporation, 821 S.W.2d 798 (Ky. 1991). There, a claimant of a mining accident
waited six and one-half months to notice the incident to the insurer of a
commercial, general liability policy. Id. at 799-800. The policy required prompt
notice of every “occurrence,” the latter being defined as “an accident, including
continuous or repeated exposure to substantially the same general harmful
conditions.” Id. at 800. Judgment was granted in favor of the insurer on the
prompt notice provision due to the six and one-half months before the occurrence
was reported.
On appeal, our Supreme Court rejected Kentucky’s established
jurisprudence that “‘prompt notice’ requirements are strictly a matter of contract
law, and, as such, ‘a condition precedent to recovery on the policy.’” Id. at 800
(citations omitted). Instead, our highest Court added a requirement that liability
insurers under occurrence policies who have “prompt notice” provisions must
demonstrate that they were prejudiced by insureds’ failures to notice occurrences
-13- promptly. But see Kentucky State Univ. v. Darwin Nat’l Assurance Co., 677
S.W.3d 294 (Ky. 2023) (rejecting the notice-prejudice rule in certain claims-made-
and-reported liability policies). Furthermore, that Court ruled that the burden of
proving “some substantial prejudice” rests upon the insurance company:
We view the question of prejudice in terms of whether it is reasonably probable that the insurance carrier suffered substantial prejudice from the delay in notice. If the evidence on this issue is in conflict, or if reasonable minds could differ as to what the evidence proves in this regard, the issue is one for the trier of fact. The issue is ripe for summary judgment only where the proof is conclusive, or there has been a failure of proof, on this subject.
Id. at 803.
II. The date of the notice
Waller’s principal argument is that she was not required to give State
Auto notice of the loss until she was aware that her claim exceeded her deductible.
Waller’s argument relies on one use of the phrase “covered occurrence” in the
Jones opinion, extrapolating from that phrase that “[a] covered occurrence means
an occurrence for which the insured can obtain benefits in excess of a deductible.”
Appellant’s Brf. at 14. Jones, however, provides no such support for this
interpretation.
The Jones Court used the phrase “covered occurrence” while it was
discussing one of the four “major features” of insurance law in Kentucky that made
-14- it unreasonable to decline to require insurers to prove they were prejudiced by
untimely notice. That Court noted that these standard, form insurance policies are
contracts of adhesion that afford a customer no “realistic opportunity to bargain.”
821 S.W.2d at 801. Ambiguous terms in a contract of adhesion must be construed
liberally to resolve all doubts in favor of the insured. Id. The Court noted that
“prompt notice” in this contract of adhesion had neither a clear meaning nor strong
parameters. Accordingly,
[a] strict forfeiture interpretation of the prompt notice requirement excludes from the equation both the reasons why the insured failed to give prompt notice, such as whether a layman would realize that there was a covered occurrence, and the question whether the insurance carrier suffered any substantial prejudice from the delay.
Id. at 802.
Waller’s interpretation of “covered occurrence” as a loss that exceeds
the deductible is not to be found in this citation to Jones. Such interpretation is
potentially too broad, as insurance contracts vary by their terms. “Every insurance
contract shall be construed according to the entirety of its terms and conditions as
set forth in the policy . . . .” KRS 304.14-360. Pursuant to contract law principles,
“a court will interpret the contract’s terms by assigning language its ordinary
meaning and without resort to extrinsic evidence” and enforce the contract strictly
according to its terms in the absence of ambiguity in the written instrument. Frear
v. P.T.A. Indus., Inc., 103 S.W.3d 99, 106 (Ky. 2003) (citing Hoheimer v.
-15- Hoheimer, 30 S.W.3d 176, 178 (Ky. 2000)). Ambiguity exists “‘if a reasonable
person would find it susceptible to different or inconsistent interpretations.’” Wehr
Constructors, Inc. v. Assurance Co. of America, 384 S.W.3d 680, 687 (Ky. 2013)
(quoting Hazard Coal Corp. v. Knight, 325 S.W.3d 290, 298 (Ky. 2010)). Any
“[a]mbiguity is generally resolved in favor of the insured.” Kentucky State
University, 677 S.W.3d at 301 (citing Thomas v. State Farm Fire and Cas. Co.,
626 S.W.3d 504, 507 (Ky. 2021)). But “[w]hen ‘the terms of an insurance policy
are clear and unambiguous, the policy will be enforced as written.’” Kentucky
State Univ., 677 S.W.3d at 300 (quoting Kemper Nat’l Ins. Cos. v. Heaven Hill
Distilleries, Inc., 82 S.W.3d 869, 873 (Ky. 2002)).
Here, Waller’s insurance contract did not require notice of a loss only
after that loss exceeded the deductible. The relevant, notice provision reads as
follows:
B. Duties After Loss
In case of a loss to covered property, we have no duty to provide coverage under this policy if the failure to comply with the following duties is prejudicial to us. These duties must be performed either by you, an “insured” seeking coverage, or a representative of either:
1. Give prompt notice to us or our agent . . . .
-16- The relevant deductible provision states: “subject to the policy limits
that apply, we will pay only that part of the total of all loss payable under Section I
that exceeds the deductible amount shown in the Declarations.”
Together, this insurance contract requires an insured to notice the
insurer once there is a loss. Separately, the insurer has a duty to pay the total of all
loss that exceeds the deductible. In other words, the deductible controls the
amount to be paid by the insurer to the insured on a covered loss; the deductible
does not control whether and when there is a loss. Thus, Waller’s argument that
she was not required to notice a loss until the loss exceeded the deductible must
fail. See Hartford Fin. Serv’s Grp., Inc. v. Cleveland Pub. Library, 168 F. App’x
26 (6th Cir. 2006) (rejecting argument that a “loss” has not occurred “until the
damage to its property exceeded the amount it would have to pay as a
deductible”).5
Waller alternatively argues that if she was required to “notice” State
Auto, she complied with the provision in 2018.6 She notes that the 2019-e-mail
from Reilmann, State Auto’s adjuster on her 2019 claim stated, “I understand you
called in a claim last year, and it did not get entered.” This argument ostensibly
5 See Sixth Circuit Rule 32.1(a) permitting citation of any unpublished opinion, in contravention of Federal Rules of Appellate Procedure 32.1(a). 6 Much like the record evidence regarding the timing of the notice of loss, Waller’s arguments on appeal are a moving target, sometimes claiming the notice occurred in 2018, sometimes in 2019, and sometimes in 2020.
-17- separately defines “notice” and “claim.” Interestingly, State Auto’s brief uses
“notice” and “claim” almost interchangeably.
As insurance contracts vary according to their terms, though, we must
analyze the contract to determine whether “notice” and “claim” are synonymous.
Here, the instant, insurance contract’s “notice” provision does not require that a
“claim” be made, but only mandates that the insured “[g]ive prompt notice to us or
our agent” of a loss. Neither “notice” nor “claim” is a term in the definitions
section of the insurance contract. The two terms are not wholly synonymous,
either, as a notice is an action that may occur before a claim is initiated. See, e.g.,
Jones, 821 S.W.2d at 800 (“The insurance carrier, Bituminous Casualty, first
became aware of the occurrence through a letter sent to Partin by Jones’ attorney,
dated August 20, 1988, with a copy to Partin’s insurance agent, Energy Insurance
Agency, advising Jones intended to pursue a claim. This agency in turn reported
the potential claim to Bituminous Casualty on August 24, 1988.”).
It is noteworthy that State Auto, the drafter of the instant, insurance
contract, used both “notice” and “claim” in different contexts throughout the
contract. It even used “notice” at other times in this same, “prompt notice” section,
i.e., an insured has a duty to [n]otify the police in case of loss by theft,” and
“[n]otify the credit card or electronic fund transfer card or access device company
-18- in case of loss . . . .” Neither of those uses equates “notify” to filing a claim with
the insurance company.
The contract contains the term “claim,” on the other hand, just a few
paragraphs below the “notice” provision regarding an insured’s duty to provide
“[e]vidence or affidavit that supports a claim under E. 6. . . .” This use of “claim”
indicates the insured has taken further steps beyond the notice provision. And,
more on point, a later provision in the contract differentiates the two terms:
e. You may disregard the replacement cost loss settlement provisions and make claim under this policy for loss to buildings on an actual cash value basis. You may then make claim for any additional liability according to the provisions of this Condition C. Loss Settlement, provided you notify us of your intent to do so within 180 days after the date of loss.
This provision explicitly differentiates “notices” and “claims,” making
them separate and distinct actions to be undertaken by the insured, who can “make
claim,” but only if first “notify[ing] us of your intent to do so[.]” Additionally, the
two words differ in meaning as the requisite notice to be provided under this
section has a time limitation, but the filing of the claim does not. Thus, it appears
“notice” and “claim” are separate terms and actions, and the contract required the
insured to notify State Auto or its agent of a loss prior to the formal initiation of a
claim. See also Ashland Hosp. Corp. v. Darwin Select Ins. Co., 664 S.W.3d 509,
515 (Ky. 2022) (“did not constitute notification of circumstances that might give
-19- rise to a claim”); Commercial Travelers Mut. Accident Ass’n v. Witte, 406 S.W.2d
145 (Ky. 1966) (“‘The purpose of a provision for notice and proof of loss is to
allow the insurer to form an intelligent estimate of its rights and liabilities, to
afford it an opportunity for investigation, and to prevent fraud and imposition upon
it.’”) (quoting 29A Am. Jur. 490 (Insurance, s 1374), Couch on Insurance (2d), s
49.373 (Vol. 14, p. 15), and O’Reilly v. Guardian Mut. Life Ins. Co., 60 N.Y. 169,
19 Am.Rp. 151 (1875)). Moreover, to the extent, if any, that “notice” and “claim”
are ambiguous in this insurance contract, we generally resolve any ambiguities in
favor of the insured to provide coverage for the insured under a reasonable
interpretation of the ambiguous clauses. See Ashland, 664 S.W.3d at 516
(summarizing Kentucky’s insurance contract interpretation jurisprudence). But see
Keathley v. Grange Ins. Co. of Michigan, 803 F. App’x 907, 911 (6th Cir. 2020)
(unpublished) (while interpreting Michigan law, the majority held that an insured’s
phone call notice to an insurance agent with explicit instructions to avoid filing a
claim was an insufficient action to constitute notice of a loss). Compare with
Keathley, 803 F. App’x at 913-15 (White, J., concurring in part and dissenting
part) (concluding that the same type of notice as in Keathley did comply with the
notice of a loss provision because the provision was ambiguous, and Michigan law
required the ambiguity to be construed in favor of the insured).
-20- This discussion of “notice” versus “claim” brings us to the question of
the appropriateness of summary judgment on the notice issue here. As we have
noted previously:
while the meaning of words in an insurance contract is a question of law, whether the conduct of the policyholder meets the definition of those words is a question of fact for the jury. Anderson v. National Sec. Fire and Cas. Co., 870 S.W.2d 432, 435 (Ky. App. 1993). Further, if there is evidence from which different inferences may be drawn, then the inference to be drawn is for the jury to determine. Id.
Marshall v. Kentucky Farm Bureau Mut. Ins. Company, 618 S.W.3d 499, 502 (Ky.
App. 2020).
Here, the insurance contract required Waller to notice State Auto
promptly of a loss. The parties provided conflicting evidence regarding the timing
and manner by which Waller noticed State Auto of the loss, and a factfinder could
determine notice occurred under any of three dates. First, a factfinder could
determine that Waller provided notice of the loss to State Auto in 2018. The
Reilmann e-mail shows that Waller may have notified State Auto of the 2018
incident in 2018. However, Waller, in her deposition, averred that she did not
know if she called her agent and noticed the loss in 2018. She did recall that she
did not make a claim at that time because she did not believe the damage exceeded
her deductible. That evidence is supported by Heeke’s affidavit, which states that
Waller did not “report a claim” to her insurance agency for the 2018 loss.
-21- Next, a factfinder could determine that Waller gave notice to State
Auto in 2019 of the 2018 loss. The Reilmann e-mail also provides evidence of this
2019 notice.7 The Heeke affidavit further supports that conclusion, as it states that
Waller informed her insurance agent about the 2018 damage in 2019, but Waller
“never requested Hyland to formally present any such claim to State Auto.”
Finally, a factfinder could determine that Waller provided notice to
State Auto in 2020 of the 2018 loss. Indeed, Waller’s attorney’s e-mail affirms
that she definitively notified them of the 2018 incident as of June 22, 2020.
Accordingly, a material issue of fact remains regarding the date that
notice occurred. Phoenix American Adm’rs, LLC v. Lee, 670 S.W.3d 832, 840
(Ky. 2023) (“Because a factual dispute existed as to when Lee first notified
Phoenix that his Kia was totaled, the [Court of Appeals] held that summary
judgment was improper. We agree.”). Remand is necessary for a factfinder to
determine the date that State Auto was noticed of the 2018 incident. Id. A factual
finding on the timing of the notice is an essential pre-requisite to determining
whether the notice was “prompt” pursuant to the contract’s terms. See, e.g., Jones,
821 S.W.2d at 800 (six and a half months’ delay not prompt); Falls City Plumbing
Supply Co. v. Potomac Ins. Co., 193 Ky. 734, 237 S.W. 376, 378 (1922) (“[T]he
7 Interestingly, State Auto seemingly concedes that notice might have been given by at least this point in time, as it argues in its brief that it was under no obligation to investigate the loss in 2019 because no claim was made at that time. Appellee’s Brf. at 4-5.
-22- question whether the notice was given within a reasonable time is one for the
jury.”). Accordingly, we reverse and remand for factual findings on this issue.
We address the remaining issues to the extent that they may be
relevant to the issues presented on remand.
III. Discovery rule -- insidious onset
Waller alternatively argues that her notice in June of 2020 was timely
because the damages allegedly occurred by insidious onset. Waller’s argument is
based on her belief that the discovery rule should apply to the later-discovered,
interior damage to her home. “The discovery rule allows for an action to accrue
when the plaintiff discovers (or in the exercise of reasonable diligence should have
discovered) the injury.” Bridgefield Cas. Ins. Co., Inc. v. Yamaha Motor Mfg.
Corp. of America, 385 S.W.3d 430, 433 (Ky. App. 2012) (citing Fluke Corp. v.
LeMaster, 306 S.W.3d 55, 60 (Ky. 2010)). The discovery rule is not available in
all circumstances; instead, it is “available only in cases where the fact of injury or
offending instrumentality is not immediately evident or discoverable with the
exercise of reasonable diligence[.]” LeMaster, 306 S.W.3d at 60. While we do not
hold that the discovery rule applies in homeowner’s liability, insurance contracts,
we can dismiss this claim because, arguendo, the circumstances presented here
would not sustain an invocation of the discovery rule.
-23- In the instant case, a large tree fell on Waller’s house in 2018. The
facts viewed in a light most favorable to Waller show that the injury to her home
could have been discovered immediately through the exercise of reasonable
diligence, or, at worst, at least by 2019. Moreover, Waller was abundantly aware
of the need to inspect her roof in 2018 based solely on the large tree limbs laying
across her roof. The evidence even demonstrates that she may have noticed her
insurance agent at the time, although she did not make a formal claim, providing
evidence that Waller was, indeed, aware of the damage to her home.
And, in 2019, while addressing a different tree falling on her roof,
State Auto affirmatively apprised Waller of the need to make a claim on the 2018
tree fall. Thus, State Auto provided evidence that the alleged damage from the
2018 tree fall was or should have been reasonably apparent by at least the time of
the 2019 inspection. In fact, Waller’s own roofer in 2020 looked at the photos
from 2018 and 2019 and determined the cause must have been the 2018 incident.
Her roofer, Colvin, swore an affidavit that states in relevant part:
5. I have seen a photograph dated 04/10/19 attached hereto as Exhibit B which I understand was taken by a State Auto adjuster when visiting the home of Terri Waller at that time. In my opinion, the places on the roof which are indicated on this photograph are the same places where I found damage to the roof when I inspected the home in 05/2020.
....
-24- 9. The photograph attached hereto as Exhibit C is a photograph of the top of the roof taken by State Auto on 04/10/19 which based on reasonable roofing probability shows damage caused when the tree fell on the roof on 06/28/18. State Auto indicates that this damage was not significant, but the damage is significant and caused leaks which contributed to the interior damage to the home.
Even if Waller did not realize the existence or extent of the interior
damage until much later, this discovery does not alter Waller’s knowledge both
that the tree fell on her house in 2018 and that such an incident could result in
damage to her house. She could have made her claim then, or at least by 2019.
She did neither, instead waiting another year, which is almost two years after the
incident, before making a claim with State Auto. Accordingly, without deciding
whether the discovery rule should apply in cases such as these, arguendo, its
application to the instant case affords Waller no quarter. The evidence shows that
she should have discovered the “fact of injury or offending instrumentality”
through the exercise of reasonable diligence initially in 2018, again in 2019, and, at
the latest, May of 2020. LeMaster, supra. Thus, assuming Waller first provided
actual notice on June 22, 2020, as her counsel claims, she would be afforded no
relief under the discovery rule.
IV. Reconsideration of previous motion for summary judgment
Waller summarily argues that it was improper for State Auto to file its
second motion for summary judgment in this case because State Auto was relying
-25- on only one additional affidavit. Waller relies on obiter dicta from Moore v.
Commonwealth, 357 S.W.3d 470, 496 (Ky. 2011), admonishing the bar to stop
“badgering the court” with “multiple vexatious motions to reconsider” its previous
interlocutory rulings prior to entry of a judgment. Here, State Auto engaged in
additional discovery and filed a second motion for summary judgment, both of
which are wholly appropriate pre-trial steps. State Auto was not “like the famed
importunate widow of Holy Writ” attempting to “‘wear out’ the court by [its]
continual coming[.]” Burton v. Tartar, 385 S.W.2d 168, 169 (Ky. 1964). The
Circuit Court properly rejected this claim.
V. Estoppel
Waller also argues that State Auto should be estopped from asserting
the notice-prejudice defense because State Auto was on notice of a loss by at least
2019 and elected not to investigate. As we are remanding for a factual finding on
the date that Waller provided notice to State Auto,8 resolution of the estoppel issue
is premature.
8 For example, Reilmann’s e-mail does indicate that Waller noticed her agent in 2018 or 2019 of the 2018 loss. However, we do not know Reilmann’s source for this information. Was he simply reiterating what Waller had informed him? Was his e-mail based on facts derived from State Auto or its agents? A genuine issue of material fact remains as to the manner and timing of any notice to State Auto of the loss. Depending on the future fact-finding of the notice date, Waller may have a viable, equitable estoppel claim if State Auto was on notice and chose not to investigate the claim.
-26- VI. Prejudice
Finally, we must briefly discuss whether State Auto has demonstrated
that it was substantially prejudiced by any delay in notice per the notice-prejudice
rule. Pursuant to the rule, once it is shown that a prompt notice provision has been
breached, the burden is on the insurer to demonstrate that it was prejudiced by the
breach. Jones v. Bituminous Cas. Corp., 821 S.W.2d 798, 803 (Ky. 1991). The
insurer must show “substantial prejudice from the delay in notice. If the evidence
on this issue is in conflict, or if reasonable minds could differ as to what the
evidence proves in this regard, the issue is one for the trier of fact.” Id.
On remand, the question whether State Auto suffered prejudice may
also constitute a fact issue, depending upon the date that the factfinder determines
notice was given to State Auto of the loss. If the factfinder determines Waller
promptly noticed State Auto, then there is no need for a prejudice inquiry because
there was no delay. If, however, the factfinder decides that Waller did not
promptly provide notice, State Auto may be able to demonstrate that it was
substantially prejudiced if the damage, which sat unrepaired for one or two years,
became more extensive than in 2018 or 2019. We note that Waller’s own expert
admitted in his affidavit that the damage in 2020 was worse than in 2019.
Accordingly, on remand the question of prejudice may be a nullity, a fact issue, or
an issue ripe for summary judgment.
-27- VII. Bad faith
The parties also disagree as to whether the Circuit Court properly
granted summary judgment on Waller’s bad faith claims. State Auto claims that
no statutory or common law bad faith claim can be sustained because State Auto
either had no contractual duty to pay or, alternatively, had a “fairly debatable”
dispute over the factual or legal basis for the claim. As we are reversing and
remanding for further proceedings as to the date on which notice was given, these
defenses are not yet ripe for adjudication. Thus, we likewise reverse and remand
for further proceedings on the bad faith claims.
CONCLUSION
There exists a genuine issue of material fact regarding the timing of
State Auto’s notice of the 2018 loss. Whether that notice was prompt, and if not,
whether State Auto was prejudiced by a failure to receive prompt notice, are
questions that remain open until a factfinder determines the date State Auto was
notified of the loss. Accordingly, we reverse and remand for further proceedings
as set forth in this opinion.
ALL CONCUR.
-28- BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Eric M. Lamb Perry A. Adanick Louisville, Kentucky Carmen C. Sarge Louisville, Kentucky
-29-