Crystal Lee Mosley v. Arch Specialty Insurance Company and National Union Fire Insurance Company

Summary

The Supreme Court of Kentucky affirmed the dismissal of Crystal Lee Mosley’s third-party bad-faith claims against Arch Specialty Insurance Company and National Union Fire Insurance Company. The Court held that the insurers’ insureds’ liability was not beyond dispute, the alleged settlement conduct was not sufficiently outrageous, and Mosley failed to show actual damages. The Court also affirmed the denial of discovery concerning the insurers’ mediation conduct.

Holdings

1. A third-party bad-faith claimant must first show that the insurer was contractually obligated to pay under the policy. Because Arch's policy expressly excluded bodily injury to an employee, including a leased employee such as Rhett, Mosley could not satisfy the first Wittmer element and her bad-faith claim against Arch failed as a matter of law.
2. A third-party bad-faith claim fails as a matter of law unless the insured's liability is reasonably clear or beyond dispute. Because Arch's and National Union's insureds had substantial factual and legal defenses, including workers' compensation immunity, potential fault allocation, bailment issues, and the possibility that other parties or Rhett would bear fault, their liability was not beyond dispute.
3. Mosley failed to establish the actual damage and outrageous conduct required for a third-party bad-faith claim. Offering policy limits, conditioning exhaustion of Arch's limits on a release for both insureds, negotiating global settlements, using one attorney at mediation, and causing at most a delay in settlement did not constitute prohibited leveraging or conduct sufficiently outrageous to support bad faith.
4. The trial court properly denied Mosley's discovery motion. Although mediation interactions constitute settlement conduct that may potentially be discoverable and admissible in a bad-faith action, discovery is not warranted when the claimant alleges only proper settlement conduct that would have no probative value on bad faith.
5. Mosley's civil-conspiracy claim was properly dismissed because the use of one attorney at a mediation, without evidence of an unlawful agreement or concerted unlawful act, did not establish conspiracy.

Questions Presented

1. Whether Mosley pleaded a legally viable third-party bad-faith claim against Arch when Arch's policy excluded coverage for bodily injury to a leased employee.
2. Whether Mosley presented a genuine issue of material fact that National Union's insureds' liability was beyond dispute, as required for a third-party bad-faith claim under Wittmer v. Jones.
3. Whether the insurers' global settlement offers, refusal to settle individual claims separately, use of one attorney at mediation, and alleged delay constituted outrageous conduct, actual damage, or prohibited leveraging under Kentucky law.
4. Whether Mosley was entitled to additional discovery concerning the insurers' mediation and claim-handling conduct.
5. Whether Mosley's allegation that Arch and National Union used one attorney at a mediation established a civil-conspiracy claim.

Disposition

affirmed