INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
A classical gas
In early 2007, the heirs of Ben and Lillian Salyer brought an action against J. D. Carty Resources, LLC, and Anaconda Drilling of Kentucky, LLC, alleging that they had trespassed on their land, drilled natural gas wells, and thereby damaged their land and deprived the heirs of mineral royalties. The alleged trespass began in 1993.
In March 2008, based on surveys, Carty admitted that its wells had drawn natural gas from under the Salyer heirs’ property, and subsequently the trial court entered a partial summary judgment as to liability.
In December 2008, Carty entered an agreed judgment with the Salyer heirs to pay $628,000, with payments to be made in monthly installments over the course of 2009. Carty defaulted almost immediately.
Greenwich Insurance Company, which insured Carty during two policy years, July 2005 to July 2007, had defended Carty under a reservation of rights and, without admitting that its policy covered the conversion of the natural gas, offered to contribute $20,000 to Carty toward payment of Carty’s agreed judgment with the Salyer heirs. In negotiating this payment with the Salyer heirs’ counsel, Carty’s counsel, who had been retained by Greenwich to represent Carty, advised the Salyer heirs’ counsel of Carty’s release in favor of Greenwich.
After Carty’s default, the Salyer heirs sought payment by Greenwich of their agreed judgment with Carty and sought and were granted leave to file their fourth amended complaint to assert claims against Greenwich and Bituminous Casualty Company, insurers respectively of Carty and Anaconda. The claims were for violation of the federal Unfair Claims Settlement Practices Act (UCSPA) and common law bad faith.
Greenwich was aware of the litigation when it was filed in early 2007. In August 2010, Greenwich filed a motion to sever the claims against it from the remaining issues in the case. It reaffirmed that it had been defending the underlying case under a reservation of rights and that before a bad faith claim could proceed, coverage and an obligation to pay had to be established. Thereafter, the parties filed cross motions for summary judgment with respect to whether the policy covered the Salyer heirs’ claims.
In early 2011, the trial court entered an order granting the Salyer heirs’ motion for partial summary judgment, holding that Greenwich’s policies covered Carty’s actions that formed the basis of the Salyer heirs’ complaint and subsequent judgment.
The trial court made this order final and appealable. Greenwich appealed this determination; but on its review, the court of appeals granted the Salyer heirs’ motion to dismiss the appeal as interlocutory.
As a result, no final determination was made as to whether the policies covered Carty’s actions and the Salyer heirs’ claims. This lack of final decision remains true to this point.
On remand, litigation as to the bad faith claims resumed. In November 2017, Greenwich again moved to dismiss the fourth amended complaint on the grounds that Kentucky case law prohibits a third party from pursuing a claim under the UCSPA for the purposes of determining coverage, and that a third party may not pursue a common law bad faith claim. The Salyer heirs filed a motion to file a fifth amended complaint to assert a declaration of rights that the policies covered their claims. The trial court granted the Salyer heirs’ motion in April 2018 and scheduled a jury trial to begin that September.
After the trial, the jury awarded the Salyer heirs $834,000 in compensatory damages and $14.3 million in punitive damages, and the trial court entered a judgment accordingly. This judgment was in addition to the trial court’s order that Greenwich was liable on the original agreed judgment between the Salyer heirs and Carty, which, including interest, totaled more than $1.5 million by November 2018. Greenwich then filed two notices of appeal, which the court of appeals consolidated.
The court of appeals held that “the circuit court improperly permitted the [Salyer heirs] to pursue their bad faith claims against it … because coverage had not been established when they filed their third-party bad faith complaint.” The court of appeals did not address any issues relating to policy coverage or the Magoffin circuit court trial.
The Salyer heirs filed a motion for discretionary review, which the court granted.
The Kentucky supreme court reversed the opinion of the court of appeals and remanded the case to that court to address the remaining issues raised by the parties related to the coverage provided by the Greenwich policy and the circuit court’s trial in this matter.
Estate of Bramble v. Greenwich Insurance Company—Supreme Court of Kentucky—June 15, 2023—No. 2022-SC-0043-DG.
