778 F.Supp.3d 905
W.D. Ky.2025Background
- CEB Investments (seller) agreed to sell a building to Ultimate Fitness (buyer) via land installment contract; legal title held by CEB, equitable title passed to Ultimate.
- Before completion of payments, a tornado destroyed the property; both parties carried separate insurance policies (CEB with Nationwide, Ultimate with West Bend).
- Initial claims were made to both insurers; CEB withdrew its claim with Nationwide after West Bend’s payment was expected to be higher.
- Ultimate paid off the remaining balance on the contract, fully compensating CEB for its insurable interest in the property.
- CEB sought further recovery from Nationwide, despite being paid in full by Ultimate, arguing breach of contract and bad-faith claims.
- Nationwide denied further payment, asserting CEB had already recovered its insurable interest; litigation followed with cross-motions for summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Insurable interest limitation | CEB can recover policy limit | Only insurable interest owed | Only insurable interest (unpaid balance) |
| Breach of contract | Policy required additional pay | No breach; CEB already paid | No breach; CEB fully compensated |
| Notice provision compliance | Nationwide delayed/failed notice | No notice due; no proof of loss filed | No breach; notice not triggered |
| Bad faith/Unfair Claims Practices | Nationwide acted in bad faith | No breach, so no bad faith | No bad faith without breach |
Key Cases Cited
- Sebastian v. Floyd, 585 S.W.2d 381 (Ky. 1979) (seller in land contract retains only legal title and insurable interest is limited to unpaid purchase price)
- Estes v. Thurman, 192 S.W.3d 429 (Ky. Ct. App. 2005) (risk of loss passes to buyer under installment contract; seller’s insurable interest is unpaid price)
- Davidson v. American Freightways, Inc., 25 S.W.3d 94 (Ky. 2000) (bad-faith insurance claim requires an underlying breach of contract)