Eastern District of Kentucky Grants Insurer’s Motion for Summary Judgment, Agreeing that Insured Made a Material Misrepresentation in his Claim

Lawrence Proctor submitted a claim to GEICO for damage to his RV that he claimed was caused by a January 6, 2015 motor vehicle accident. Proctor’s policy provided compensation for either the actual cash value of the damage property at the time of the loss or the amount necessary to repair the damaged property to its pre-loss condition. The policy specifically excluded compensation to any person who “knowingly conceals or misrepresents any material fact or circumstance” related to a claim.

The GEICO field investigator investigating Proctor’s claim found that the damage to the RV predated the January 6, 2015 accident and noted that Proctor gave varying responses as to the original purchase price of the RV throughout the investigation.  Based on the investigation, GEICO denied Proctor’s claim and Proctor filed suit alleging breach of contract and bad faith in violation of the Kentucky Unfair Claims Settlement Practice Act.  GEICO filed a motion for summary judgment, which the court granted.  Proctor v. GEICO, No. 17-cv-348-JMH-MAS (E.D. Ky. Jan. 2, 2019).  

In finding that GEICO was entitled to judgment as a matter of law, the court first considered Proctor’s breach of contract claim.  Under Kentucky law, an insurance company is entitled to deny a claim when a material fact is concealed or misrepresented during the claim process.  The court found that not only did Proctor make an initial misrepresentation as to the purchase price, but he failed to correct this misrepresentation even though he had the ability to verify the purchase price using the RV’s original sales receipt.  Based on this misrepresentation, the court found that GEICO was entitled to deny Proctor’s claim.

Next, the court considered Proctor’s statutory bad faith claim.  In order to succeed under Kentucky’s statute, the following elements must be met:

(1)     the insurer must be obligated to pay the claim under the terms of the policy;
(2)     the insurer must lack a reasonable basis in law or fact for denying the claim; and
(3)     it must be shown that the insurer either knew there was no reasonable basis for denying the
claim or acted with reckless disregard for whether such a basis existed.

Based on Proctor’s material misrepresentation as to the purchase price of the RV, the court concluded that GEICO did not lack a reasonable basis in law or fact to deny the claim.  Proctor therefore could not satisfy the second element of a statutory bad faith claim and the court accordingly granted GEICO’s motion for summary judgment.