Opinion
NO. 2012-CA-002066-MR
03-13-2015
JAMES RIVER INSURANCE COMPANY APPELLANT v. BATES CONTRACTING & CONSTRUCTION, INC. APPELLEE
BRIEFS FOR APPELLANT: Sean P. Mahoney Philadelphia, Pennsylvania C. Randall Tackett Whitesburg, Kentucky BRIEF FOR APPELLEE: James W. Craft, II Whitesburg, Kentucky
NOT TO BE PUBLISHED APPEAL FROM LETCHER CIRCUIT COURT
HONORABLE SAMUEL T. WRIGHT, III, JUDGE
ACTION NO. 07-CI-00190
OPINION
VACATING AND REMANDING
BEFORE: KRAMER, NICKELL, AND STUMBO, JUDGES. NICKELL, JUDGE: James River Insurance Company (James River) has petitioned for review of a judgment entered by the Letcher Circuit Court following a jury verdict awarding James River $129,084.00 in unpaid insurance premiums against Bates Contracting & Construction, Inc. (Bates). James River commenced this action seeking to recover $449,665.00 in unpaid premiums. James River alleges the trial court erred in denying its motions for summary judgment, directed verdict, and judgment notwithstanding the verdict; and in allowing Daniel Bates to offer opinion testimony regarding the multiplier rate (multiplier) used to calculate the premiums. After having carefully reviewed the record, the briefs and the law, we vacate the judgment of the trial court and remand for further proceedings consistent with this opinion.
BACKGROUND
Bates is a contracting business supplying coal miners to coal companies. In 2005, Bates retained SC&W Insurance Agency and its representative, Bill Mullins (Agent Mullins), to procure commercial general liability and excess liability insurance coverage. Through Agent Mullins, Bates submitted an application in April 2005, to James River seeking $2,000,000.00 in excess liability coverage. Bates requested its premium be based upon its estimated payroll of $500,000.00 for the upcoming year.
After receiving the application, James River issued a Commercial Excess Liability Policy (Excess Policy) for the period June 11, 2005, through June 11, 2006. The Excess Policy contained a Premium Audit Endorsement requiring Bates to pay a multiplier rate (multiplier) of $36.00 per $1,000.00 of the $500,000.00 estimated payroll, totaling an estimated premium of $18,000.00. The Premium Audit Endorsement specified the estimated premium was subject to adjustment when the policy period expired, following an audit to determine Bates's actual gross payroll. Bates accepted the Excess Policy and paid the estimated premium after James River issued an insurance binder confirming the $36.00 multiplier.
In June 2005, Bates applied for commercial general liability insurance coverage, estimating its payroll at $800,000.00. Following receipt of Bates's application, James River issued a Commercial General Liability Insurance Policy (General Policy), requiring Bates to pay a multiplier of $61.25 per $1,000.00 of the estimated $800,000.00 payroll, totaling an estimated premium of $49,000.00. The General Policy was also subject to an adjustment of the premium following the audit to determine the actual payroll. Bates accepted the General Policy and paid the estimated premium after an insurance binder was issued confirming the $61.25 multiplier.
After the policies expired, James River retained an auditing firm to determine Bates's actual gross payroll which determined the actual gross payroll to have been $5,076,928.00 for the period of the Excess Policy, and $5,451,371.00 for the life of the General Policy. Following the audit, James River issued endorsements reflecting an additional premium owed by Bates in the amount of $449,665.00. This additional premium was calculated by applying a rate of $36.00 for the Excess Policy and $61.25 for the General Policy per $1,000.00 of James River's actual gross payroll—less the amount already paid in estimated premiums.
After receiving the endorsements with the additional premium due, Daniel Bates met with Agent Mullins to discuss why the additional premium was so high. Agent Mullins testified they did not discuss whether the correct multipliers were used.
James River commenced this action to recover $449,665.00 after Bates refused to pay. Prior to trial, James River moved for summary judgment arguing the policies were enforceable, written contracts explicitly stating the multipliers and method of calculation, and expressly providing the total premium would be calculated based on an audit of Bates's actual payroll. Thus, James River argued no genuine issue of material fact existed with respect to Bates's breach of contract by refusing to pay the additional premium.
Bates filed a third-party complaint against Agent Mullins alleging he used the wrong payroll figures in purchasing the policies; these claims were settled prior to trial.
In response, Bates submitted affidavits from Daniel Bates and J.R. Bates stating the premium was calculated using incorrect, higher multipliers. The affidavits provided no explanation of why the multipliers were allegedly incorrect.
At the summary judgment hearing, James River argued Bates provided no evidence of an agreement or promise to use different multipliers other than those specified in the policies. It argued Bates's claim of different multipliers for the higher actual payroll was based on speculation and unsupported by the evidence and plain language of the contracts. Claiming the multipliers listed in the policies applied to the estimated payroll when the policies were issued, Bates argued lower multipliers existed for the higher actual gross payroll amount. When asked to present evidence of different multipliers, Bates claimed Daniel Bates's affidavit sufficiently called the amount of the multipliers into question, and the anticipated trial testimony of Daniel Bates and J.R. Bates, together with cross-examination of James River's witnesses, would show the existence of different multipliers. James River argued these witnesses never testified as to the existence of different multipliers during their depositions.
Finding an issue of material fact existed, the trial judge denied the motion for summary judgment. A jury trial commenced on August 27, 2012.
Daniel Bates testified the parties discussed only the multipliers specified in the contracts, and James River never promised lower multipliers would be used. He admitted there is no mention of alternative, lower multipliers on the insurance contracts and binders executed by Bates. Daniel Bates further testified he thought the multipliers "should" be $15.00 and $22.00, but admitted these multipliers were based on "what's in [his] head" and were not promised by James River. He further acknowledged Bates did not specifically raise the issue of incorrect multipliers until one week before trial.
J.R. Bates testified he had no recollection of James River ever promising to change the multipliers in the insurance policies. He admitted he had never told James River it was using the wrong multipliers.
Agent Mullins testified Bates agreed to bind coverage with the multipliers specified on the contracts. He indicated James River never promised the multiplier would change after the audit.
James River's underwriting manager, Richard Kern (Underwriter Kern) testified Bates agreed to the multipliers specified in the contracts. He indicated there was never an understanding these multipliers would be altered if the payroll changed after the audit.
James River moved for a directed verdict at the close of the evidence. Arguing the four corners of the written agreement specified the amount of the multipliers, James River claimed there was no evidence of any agreement or understanding to use different multipliers. In response, Bates argued Daniel Bates's testimony provided evidence of his understanding that the multipliers should be $15.00 and $22.00. Taking the evidence in the light most favorable to the non-moving party, Bates argued Daniel Bates's testimony was sufficient basis for presenting a factual issue to the jury.
Deeming the contract ambiguous because the policies stated the multipliers applied "per (000)" of payroll, the trial judge found it unclear whether this language meant per $1,000.00. In response, James River argued "per (000)" is the manner in which $1,000.00 is written in the contract, and it was never disputed by any party the multipliers applied per $1,000.00 of gross payroll. James River argued the only issue presented for the jury to decide was the amount of the multipliers, not whether the multipliers applied per $1,000.00 of payroll. However, the judge denied James River's motion for a directed verdict.
Finding multipliers of $15.00 and $22.00 should have been used to calculate the premiums of the Excess Policy and General Policy, respectively, the jury awarded James River $129,084.00. Following the court's final judgment, James River moved for judgment notwithstanding the verdict, which was denied. This appeal followed.
STANDARD OF REVIEW
This case involves an alleged breach of contract. We interpret a contract by solely looking to the four corners of the agreement. Baker v. Coombs, 219 S.W.3d 204, 207 (Ky. App. 2007). Unambiguous terms contained within the contract are interpreted in accordance with their ordinary meaning, "without resort to extrinsic evidence." Frear v. P.T.A. Indus., Inc., 103 S.W.3d 99, 106 (Ky. 2003). A claim for breach of contract requires the claimant show existence of a valid contract, failure to comply with the terms of the contract, and damages resulting from the failure to comply. Craig & Bishop, Inc. v. Piles, 247 S.W.3d 897, 903 (Ky. 2008). The construction and interpretation of a contract, including questions regarding ambiguity, are questions of law to be decided by the court, and the standard of review on appeal of the trial court's determination of ambiguity is de novo. First Commonwealth Bank of Prestonsburg v. West, 55 S.W.3d 829, 835 (Ky. App. 2000) (citations omitted).
The standard of review on appeal when reviewing a grant or denial of summary judgment is "whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law." West Kentucky Rural Electric Cooperative Corp. v. City of Bardwell, 362 S.W.3d 351, 355 (Ky. App. 2011) (quoting Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996)). We review the record in a light most favorable to the non-moving party and resolve any doubts in its favor. Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). Since a summary judgment involves no fact-finding, this Court's review is de novo. Blevins v. Moran, 12 S.W.3d 698, 700 (Ky. App. 2000). The movant bears the initial burden of convincing the court by evidence of record that no genuine issue of fact is disputed. The burden then shifts to the party opposing summary judgment to present "at least some affirmative evidence showing that there is a genuine issue of material fact for trial." Steelvest, 807 S.W.2d. at 482.
ANALYSIS
The parties in this case stipulated the Excess Policy and the General Policies are valid and enforceable written contracts, and stipulated to the amount of the estimated premiums calculated by applying the specified multipliers per $1,000.00 of the estimated payrolls. The parties also agreed Bates was required to remit the difference between the estimated premium and the additional premium based on the actual payroll amount as determined by a subsequent audit. The only contested issue at trial was the rate of the multipliers to be used in calculating the additional premium.
On appeal, James River argues the trial court erroneously denied its motion for summary judgment. It argues the plain language of the contracts clearly stated the multipliers to be used in the calculation of the premium were $36.00 for the Excess Policy and $61.25 for the General Policy, and there was no agreement to alter these multipliers. James River claims Daniel Bates's affidavit is unsupported, conclusory, and insufficient to prevail over the clear and plain language of the contract.
In its response brief, Bates claims the trial court correctly denied James River's motion for summary judgment by finding the contracts ambiguous because they "left blanks in the per (000) portions of the contract." In its reply brief, James River argues Bates falsely asserts there were "blanks" in the contracts, and claims Bates never argued there was an ambiguity in the contract at summary judgment.
Our review of the record indicates Bates's account of the summary judgment hearing is factually inaccurate. At no point during the summary judgment hearing or trial did Bates argue the contracts were ambiguous or missing information—and the judge did not make such a finding during the summary judgment hearing. Rather, in response to James River's motion, Bates agreed the contracts specified multipliers of $36.00 for the Excess Policy and $61.25 for the General Policy, but claimed those were the rates for the estimated payroll and were not the rates to be applied to the actual gross payroll. When asked by the judge to present evidence of multipliers different from those specified in the contracts, Bates referred to the affidavit of Daniel Bates and testimony to be presented at trial. We hold this evidence is insufficient to survive a summary judgment motion.
Daniel Bates's affidavit is self-serving, conclusory, unsupported, and contrary to the plain and clear contractual terms. The affidavit simply declares the multipliers in the contracts were based on the estimated payroll, and claims lower multipliers should have been used for the higher actual gross payroll. This assertion is contrary to the plain language of the contract, which clearly specifies the multipliers to be used, and requires Bates to remit the difference between the estimated and actual premiums following the audit. See Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 385 (Ky. App. 2002) (one party intending a different result is insufficient to construe a contract at variance with its plain and unambiguous terms). The affidavit does not cite any specific facts demonstrating a lower multiplier was to apply to a higher payroll—such as an agreement or promise by James River to adjust the multiplier after the audit. Merely claiming a lower multiplier existed does not constitute evidence of such. "The party opposing summary judgment cannot rely on their own claims or arguments without significant evidence in order to prevent a summary judgment." Wymer v. JH Properties, Inc., 50 S.W.3d 195, 199 (Ky. 2001) (citing Harker v. Federal Land Bank of Louisville, 679 S.W.2d 226 (Ky. 1984)).
In addition to Daniel Bates's affidavit, Bates referred to future testimony to be presented at trial as evidence to defeat James River's summary judgment motion. Bates argued it expected to support its position with testimony from Daniel Bates, J.R. Bates, and a cross-examination of James River's witnesses. However, Bates did not describe their anticipated testimony with any degree of specificity, nor did it refer to any specific prior deposition testimony of these witnesses regarding different multipliers. We hold the promise to present unspecified testimony at trial is insufficient to defeat James River's summary judgment motion.
In evaluating a motion for summary judgment, "the inquiry should be whether, from the evidence of record, facts exist which would make it possible for the nonmoving party to prevail. In the analysis, the focus should be on what is of record rather than what might be presented at trial." Welch v. American Publishing Co. of Kentucky, 3 S.W.3d 724, 730 (Ky. 1999). Here, the four corners of the contract expressly provided the multipliers to be used, and stated the estimated premium was subject to an adjustment after an audit. Nowhere in the contract does it state the multipliers would change after the audit. Bates's mere assertion it expected supporting testimony at trial of other multipliers—with no specificity—is insufficient to survive James River's summary judgment motion. If Bates had evidence another multiplier should have been used, he had an obligation to present affirmative evidence and may not rely on his "mere allegations." See Swatzell v. Natural Resources and Environmental Protection Cabinet, 996 S.W.2d 500, 505 (Ky. 1999). As such, we hold James River was entitled to summary judgment as a matter of law.
Our decision holding James River was entitled to summary judgment as a matter of law renders James River's remaining claims moot. These additional arguments include allegations the trial court erred in allowing the jury to hear Daniel Bates's testimony of what he believed the multipliers should be, and erred in denying its motions for a directed verdict and judgment notwithstanding the verdict. Even if Bates could survive James River's motion for summary judgment, however, we note James River would, nevertheless, have been entitled to a directed verdict at the close of evidence, pursuant to CR 50.01.
Kentucky Rules of Civil Procedure.
A motion for a directed verdict raises only questions of law as to whether there is any evidence to support a verdict. Gibson v. Wickersham, 133 S.W.3d 494, 496 (Ky. 2004). While it is the jury's province to weigh evidence, the court will direct a verdict where there is no evidence of probative value to support the opposite result, and the jury may not be permitted to reach a verdict based on mere speculation or conjecture. Id. It is well-settled a motion for directed verdict raises only questions of law as to whether there is any evidence to support a verdict. Daniels v. CDB Bell, LLC, 300 S.W.3d 204, 215 (Ky. App. 2009) (citing Harris v. Cozatt, Inc., 427 S.W.2d 574, 575 (Ky. 1968)).
During trial, Bates failed to produce any evidence of the existence of different multipliers other than those specified in the policies. Each of the witnesses—including Daniel Bates, J.R. Bates, Underwriter Kern, and Agent Mullins— testified there was never an agreement between Bates and James River to use different multipliers, and no promise the multipliers would change after the audit. Daniel Bates admitted there is no mention of alternative, lower multipliers on the insurance contracts and binders entered by Bates. Though the jury found the correct multipliers were $15.00 for the Excess Policy and $22.00 for the General Policy, there was nothing in the record showing an agreement or understanding between James River and Bates to use $15.00 and $22.00 multipliers. Rather, the only mention of $15.00 and $22.00 multipliers was Daniel Bates's testimony explaining these figures were what he thought the multipliers should be, based on "what's in [his] head."
Bates's self-serving speculation and conjecture of what the multipliers should be is not evidence, but simply his opinion. Because Bates presented no substantial evidence supportive of the jury's finding of $15.00 and $22.00 multipliers, a directed verdict would have been proper.
Denying James River's motion for directed verdict, the judge found the contracts ambiguous because it stated the multiplier applied "per (000) of payroll." The judge found this language was unclear as to whether "per (000)" meant per hundred, thousand, or ten thousand dollars of payroll. However, the parties never disputed whether the multipliers applied per $1,000.00 of payroll. The only issue for the jury to decide was the amount of the multipliers—not whether the multipliers applied per $1,000.00 of payroll—and at no point in the proceedings did Bates or James River raise this issue. To the contrary, Bates stipulated to the accuracy of the estimated premiums calculated by applying the multipliers per $1,000.00 of the estimated payrolls. The jury found the multipliers of $15.00 and $22.00 to apply per $1,000.00 of payroll. As such, the judge erred by finding what he believed to be an ambiguity which was never raised by the parties at any point during the trial, was not a question presented to the jury, and contradicted the stipulation entered by the parties.
For the foregoing reasons, the judgment of the Letcher Circuit Court is vacated and this matter is remanded for further proceedings consistent with this Opinion.
ALL CONCUR. BRIEFS FOR APPELLANT: Sean P. Mahoney
Philadelphia, Pennsylvania
C. Randall Tackett
Whitesburg, Kentucky
BRIEF FOR APPELLEE: James W. Craft, II
Whitesburg, Kentucky