Ryan v. Discover Property and Casualty Insurance Company
3:10-cv-00320
W.D. Ky.Aug 16, 2012Background
- Ryans allege Discover violated UCSPA through bad faith handling of claims arising from a March 2007 auto accident.
- Modco (DiGiovanni’s apparent employer) is alleged to be vicariously liable; Modco had a hired/non-owned policy with Discover up to $1 million.
- Discover initially pursued Modco’s independent contractor defense, engaging a claims administrator and attorney to gather facts.
- State court granted summary judgment in Ryans’ favor on Modco’s vicarious liability; Kentucky court applied Restatement factors and found eight of nine weighed against independent contractor status.
- Discover settled Modco’s defense dispute in subsequent mediation; Hartford refused Modco defense and Discover sought to tender defense to Hartford.
- District court granted partial summary judgment, dismissing Counts II and III and narrowing Count I; Counts I and IV partially remain.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| UCSPA bad-faith standard | Ryans contend Discover had no reasonable basis for denial/settlement and acted with reckless disregard. | Discover asserts a reasonable basis for its independent contractor defense; believes issue is disputable, not bad faith. | No genuine bad-faith dispute; some post-order conduct may support bad faith claim to be tried. |
| Independent contractor defense and bad faith | Discovery failed to show reasonable basis for the defense; knew it would fail. | Defense had factual support; independent contractor status is legitimately disputable as a matter of law. | No reasonable basis for bad faith found; allowed to stand as defensible though ultimately not controlling. |
| Post-summary judgment conduct (modco defense tender to Hartford) | Discover knew Modco was not covered and nonetheless attempted to discharge defense to Hartford to avoid payment. | Tendering to Hartford was part of efforts to manage the claim; not necessarily bad faith. | Jury could find bad faith for post-judgment conduct; partial denial of summary judgment on this point. |
| Counts II and III (Sections 304.12-010 and 304.12-070) viability | Discover engaged in unfair methods/coercion affecting competition and restraint of trade. | No genuine issue of material fact; activities were not coercive or restraint-inducing as a matter of law. | Counts II and III dismissed with prejudice. |
| Effect of Modco settlement on Count I | Bad-faith conduct evidenced by failure to settle promptly despite liability being reasonably clear. | Several acts were lawful and not proof of bad faith; settlement decisions were reasonable under facts. | Certain aspects of Count I (bad faith) remain; other aspects dismissed. |
Key Cases Cited
- Wittmer v. Jones, 864 S.W.2d 885 (Ky. 1993) (UCSPA requires evidence of intentional misconduct or reckless disregard)
- Phelps v. State Farm Mut. Auto. Ins. Co., 680 F.3d 725 (6th Cir. 2012) (UCSPA threshold and punitive-damages standard described)
- Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d 437 (Ky. 1999) (good-faith settlement requirement for UCSPA)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (genuine dispute standard for summary judgment)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) (summary judgment standard; inferences in favor of non-movant)
- Tysinger v. Police Dep’t of City of Zanesville, 463 F.3d 569 (6th Cir. 2006) (definitions of genuine dispute in summary judgment context)
- Brewer v. Millich, 276 S.W.2d 12 (Ky. 1964) (Restatement-based factors for agency/independent contractor analysis)