HOLLAND v. UNITED SERVICES AUTOMOBILE ASSOCIATION (2025)

OPINION

Appellants, Joseph Holland, Individually and as Next Friend and Father of T.H., a minor child, and Next Friend of K.H., a minor child; and Maegan Holland (collectively “the Hollands”) appeal the judgment entered following a jury trial of their Kentucky Unfair Claims Settlement Practices Act (KUCSPA) and Kentucky Consumer Protection Act (KCPA) against United Services Automobile Association (USAA) as well as orders entered on their post-trial motions. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

The factual background of this case is rather complex and even still hotly contested; however, it is undisputed the Hollands carried a homeowner's insurance policy with USAA. This case centers around USAA's refusal to repair water damage to the Hollands’ home in Harrodsburg, Kentucky, following a period of heavy rains in June 2019. While some damages were paid, the main point of contention became replacement of the deteriorated fiberboard layer between the brick exterior and internal framing of the house.

The Hollands independently hired a structural engineer who claimed repairs would necessitate removal and replacement of both the fiberboard and the exterior brick. The estimate for this was $151,346.91. After consulting with their own engineer, USAA claimed that damage and repair of the fiberboard was not covered by the Hollands’ policy. In particular, USAA claimed the fiberboard damage was not covered because (1) the damage was not “sudden and accidental” as required for coverage under the policy; (2) the damage was excluded from the policy because it resulted from a construction defect in the house; and (3) the damage, even if covered was subject to a $2,500 sublimit for mold, fungus, or rot.

On January 14, 2020, the Hollands filed suit against USAA. First, the Hollands requested a declaratory judgment seeking declarations that the policy provided coverage for the water damage to the fiberboard; that USAA was obligated to pay for the contested repairs; and that USAA was obligated to indemnify the Hollands for the loss of the use of their home. Second, the Hollands sought damages from USAA for breach of contract.

On February 2, 2021, the Hollands filed a motion to amend their complaint, which was granted. This amended complaint restated the declaratory judgment and breach of contract claims while adding two new claims: one for violations of the KCPA, and another for bad faith insurance practices under both common law and the KUCSPA.

Mediation resulted in a partial settlement where USAA paid the Hollands $151,346.91 (the amount of the estimate provided by their engineer for fiberboard repair), and the Hollands agreed to dismiss their breach of contract and declaratory judgment claims. The parties then tendered an Agreed Order dismissing those two claims “with prejudice, with each party to bear their own costs.”

The remaining claims proceeded to a six-day jury trial. During the trial, the parties hotly disputed whether the fiberboard damage was covered under the policy, USAA's conduct in investigating and handling the Hollands’ claim, and how USAA's conduct affected the Hollands.

On the fifth day of trial, shortly after the noon hour and after examination of what would be the Hollands’ final witness, the trial court summoned counsel for both parties to the bench. During that bench conference, the Hollands indicated they intended to rest their case-in-chief. USAA indicated they planned to rest without calling any witnesses. Following that bench conference, in the presence of the jury, the Hollands announced completion of their case-in-chief. Notably, however, USAA did not announce it was resting its case-in-chief. After the Hollands’ announcement, the jury recessed for lunch. Once the jury left the courtroom, the trial court asked the parties if they wished to make any motions. USAA made a lengthy motion for directed verdict on all claims, stating that the Hollands failed to satisfy the three-part bad faith test set forth in Wittmer v. Jones, 864 S.W.2d 885 (Ky. 1993). As set forth in Wittmer,

[A]n insured must prove three elements in order to prevail against an insurance company for alleged refusal in bad faith to pay the insured's claim: (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.

Id. at 890. Failure to prove any one of the Wittmer elements would be fatal to the Hollands’ claim under the KUCSPA and common law bad faith.

While arguing for directed verdict, USAA largely conceded that there was a significant factual dispute as to whether or not the damage was covered under the policy. Instead, USAA argued the Hollands had not satisfied the second element, whether there was a reasonable basis in law or fact for denying the claim. After hearing argument from the Hollands, the trial court denied USAA's directed verdict motion. The trial court then broke for lunch.

Following the lunch break but before the return of the jury, the trial court allowed counsel for both parties an opportunity for consideration of any matters. At that time, and before USAA was given the opportunity to present its case-in-chief, the Hollands made a motion for directed verdict “on the limited issue of coverage,” arguing that USAA had conceded the issue of coverage (the first element of Wittmer) when arguing its directed verdict motion.² USAA responded that they had not conceded the issue but merely expressed the likelihood that the trial court would find there existed an issue of fact as to coverage. Furthermore, USAA pointed to the Hollands’ earlier response to USAA's directed verdict motion, wherein the Hollands argued that there were questions of fact as to all three Wittmer elements. The trial court agreed with USAA and denied the Hollands’ motion for a limited directed verdict.

The trial court then brought the jury back into the courtroom and directed USAA to begin its case-in-chief. As indicated in the bench conference prior to lunch, USAA chose not to present any evidence and rested its case-in-chief on the record. Following another brief bench conference, the trial court discharged the jury for the day. The trial court then asked the parties if they had any motions they wished to be heard. USAA renewed its motion for a directed verdict, which the trial court denied. When asked if they wished to make any motions, the Hollands initially declined. However, before delving into arguments on jury instructions, the Hollands made a second motion for directed verdict. They declared the purpose of their motion was to prevent waiver of any post-trial motion for a judgment notwithstanding the verdict (JNOV) or a new trial. They sought directed verdict on both the KUCSPA and KCPA claims based upon what they alleged were the admissions of USAA regarding the “false conduct” of one of USAA's engineers, “coverage payments,” and unreasonably “withholding the payment of the coverage.”³ The trial court also denied the Hollands’ second motion for directed verdict.

Discussion then shifted to jury instructions. Prior to trial, the Hollands had submitted proposed jury instructions while USAA had submitted an initial set of proposed jury instructions and two amended sets. Disagreement over the jury instructions was spirited and persisted well into the final day of trial, with several revisions before the final instructions were given to the jury. Prior to instructing the jury, the trial court allowed the parties to make objections to the instructions; the objections relevant to this appeal will be developed further in this Opinion.

The structure of the jury instructions was rather complicated, containing twenty-seven interrogatories for the jury. The first twenty-two interrogatories concerned the KUCSPA and common law bad faith claims. The first interrogatory asked the jury to determine whether the Hollands had established the Wittmer elements, reading as follows:

Interrogatory No. 1

Do you believe from the evidence presented in this case:

That USAA was obligated to pay the Hollands’ claim under the terms of the policy?

_ Yes      _No

That USAA lacked a reasonable basis in law or fact for denying that it was obligated to pay the Hollands’ claim under the policy?

_ Yes      _No

That USAA either knew there was no reasonable basis for denying the Hollands’ claim or acted with reckless disregard for whether such a basis existed?

_ Yes      _No

If the jury answered “Yes” to all three questions, they were then directed to answer various interrogatories regarding theories of liability under the KUCSPA. After answering these interrogatories, the jury was ultimately directed to Interrogatory No. 23.

If the jury answered “No” to any question under Interrogatory No. 1, they were directed to proceed immediately to Interrogatory No. 23.

Interrogatory No. 23 concerned the KCPA, and asked as follows:

Interrogatory No. 23

Do you believe that USAA:

(1) Engaged in unfair, OR false, OR misleading, OR deceptive acts or practices in the handling of the Hollands’ claims?

(2) You are instructed that “unfair” shall be construed to mean unconscionable.

Yes _      No _

Next, Interrogatory No. 24 asked the jury if the Hollands had suffered any actual damages as a result of USAA's conduct. That interrogatory read as follows:

Interrogatory No. 24

If you answered “YES” to any of Interrogatory Nos. 4, 7, 10, 13, 16, 19, 22, and 23, do you believe from the evidence that the conduct of USAA was a substantial factor in causing actual damages to the Plaintiffs?

Yes _      No _

If the answer to Interrogatory No. 24 was “Yes,” the jury was instructed to turn to the remaining three interrogatories concerning damages.

The jury returned a verdict which answered “No” to all three questions in Interrogatory No. 1, thereby finding that none of the three Wittmer elements were proven, thus, finding for USAA on the KUCSPA and common law bad faith claims. The jury answered “Yes” to Interrogatory No. 23, but “No” to Interrogatory No. 24, thus, finding that USAA did engage in either unfair, false, misleading or deceptive practices in handling the Hollands’ claim, but finding that USAA's conduct did not cause any actual damages to the Hollands.

Under the KCPA, the trial court has discretion to award reasonable attorney's fees and costs to the prevailing party. Kentucky Revised Statutes (KRS) 367.220(3). The parties disagreed as to who was the prevailing party. The Hollands asserted they were the prevailing party for two reasons: (1) the jury found that USAA engaged in unfair, false, misleading, or deceptive acts and practices in violation of the KCPA; and (2) the parties settled the contract claim prior to trial for the dollar amount the Hollands requested. On the other hand, USAA asserted it was the prevailing party because the jury awarded the Hollands no damages, and because the Hollands cannot assert to be the prevailing party under the KCPA on a settled breach of contract claim. On November 7, 2023, the trial court entered judgment consistent with the jury's verdict and found USAA was the prevailing party under the KCPA.

Following entry of judgment, the Hollands filed a motion seeking JNOV or, in the alternative, a new trial. The Hollands also sought an amendment of the judgment to declare them the prevailing party. In their JNOV motion, the Hollands argued that (1) their motion for directed verdict should have been granted because the evidence satisfied the elements set forth in Wittmer; (2) the jury instructions as to the KCPA (specifically Interrogatory No. 24) were erroneous because the KCPA does not require a ‘substantial factor’ causation test; and (3) under the KCPA, they were the prevailing party because the jury found that USAA engaged in unfair, false, misleading, or deceptive acts and that the contract claim had been settled prior to trial. In response, USAA argued that (1) the trial court properly denied the Hollands’ motion for directed verdict; (2) the Hollands failed to preserve their objection to Interrogatory No. 24 at trial and failed to submit a proper instruction as to their KCPA claim in their proposed instructions; and (3) the trial court properly designated USAA as the prevailing party under the KCPA.

On January 31, 2024, the trial court entered an order denying the Hollands’ motion in full. The trial court found that (1) the Hollands’ motion for directed verdict was properly denied because there was significant dispute over the second element of Wittmer; (2) the Hollands failed to bring to the court's attention their objections or issues with the final jury instructions; and (3) the Hollands failed to establish that the judgment should be amended to find the Hollands were the prevailing party. The Hollands filed a timely notice of appeal from the jury's verdict and the trial court's order on their post-trial motions.

II. STANDARD OF REVIEW

On appeal, the Hollands claim the trial court made three errors: (1) not granting their motion for directed verdict on the issue of coverage, (2) instructing the jury that a ‘substantial factor’ causation test applies under the KCPA, and (3) finding USAA to be the prevailing party for purposes of the KCPA. We disagree, albeit at times on different grounds than the trial court.

Upon making a proper motion for directed verdict, “the trial judge must draw all fair and reasonable inferences ․ in favor of the party opposing the motion.” Bierman v. Klapheke, 967 S.W.2d 16, 18 (Ky. 1998). A directed verdict may only be granted if “there is a complete absence of proof on a material issue or if no disputed issues of fact exist upon which reasonable minds could differ.” Id. at 18-19. Also, “[a] directed verdict is appropriate when, drawing all inferences in favor of the nonmoving party, a reasonable jury could only conclude that the moving party was entitled to a verdict.” Buchholtz v. Dugan, 977 S.W.2d 24, 26 (Ky. App. 1998). Upon appellate review, this Court “must ascribe to the evidence all reasonable inferences and deductions which support the claim of the prevailing party.” Bierman, 967 S.W. 2d at 18 (citing Meyers v. Chapman Printing, Inc., 840 S.W.2d 814 (Ky. 1992)). Giving deference to the trial court who heard and considered the evidence, “a reviewing court cannot substitute its judgment for that of the trial judge unless the trial judge was completely erroneous.” Davis v. Graviss, 672 S.W.2d 928 (Ky. 1984), overruled on other grounds by Savage v. Three Rivers Medical Center, 390 S.W.3d 104 (Ky. 2012).

Alleged errors regarding jury instructions are considered de novo and must be read as a whole. Carmical v. Bullock, 251 S.W.3d 324, 328 (Ky. App. 2007). Awards of costs and attorney's fees under the KCPA are reviewed for abuse of discretion. Aesthetics in Jewelry, Inc. v. Brown, 339 S.W.3d 489, 496 (Ky. App. 2011). Questions as to which party was the prevailing party in actions are also reviewed de novo. See Balsley v. LFP, Inc., 691 F.3d 747, 771 (6th Cir. 2012). Moreover, this Court “may affirm a lower court's decision on other grounds as long as the lower court reached the correct result.” Emberton v. GMRI, Inc., 299 S.W.3d 565, 576 (Ky. 2009).

III. ANALYSIS

A. THE HOLLANDS’ MOTIONS FOR DIRECTED VERDICT

On appeal, the Hollands first argue that the trial court erred by failing to grant their motion for directed verdict as to the issue of coverage in support of their KUCSPA and common law bad faith claim. The trial court denied the Hollands’ motion finding disputed issues of material fact to be determined by the jury. The parties still continue to argue the weight of the evidence and facts of the case on appeal. While we agree with the trial court that there were contested issues of fact for the jury, we also find the Hollands’ motion was procedurally deficient.

1. First Motion for Directed Verdict

As noted, supra, the Hollands made two motions for directed verdict; the first after the close of their case but before USAA rested its case on the record, and a second after USAA rested its case. In their Brief, the Hollands state the trial court should have granted their motion for directed verdict on the issue of coverage and that they preserved the issue by their first motion for directed verdict. Brief for Appellant at 10, fn. 80 (giving timestamp for the first motion for directed verdict). While the trial court analyzed the merits of the Hollands’ motion, we find the motion was untimely and deficient.

Kentucky Rule of Civil Procedure (CR) 50.01 governs motions for directed verdict, and provides in relevant part:

[a] party who moves for directed verdict at the close of the evidence offered by an opponent may offer evidence in the event that the motion is not granted, without having reserved the right to do so and to the same extent if the motion had not been made․ A motion for directed verdict shall state the specific grounds therefore.

In Jewish Hospital & St. Mary's Healthcare, Inc. v. House, 563 S.W.3d 626 (Ky. 2018), our Supreme Court explained how CR 50.01 applies to a plaintiff's motion for directed verdict. In particular, our Supreme Court stated:

Importantly, such a directed verdict in favor of a plaintiff would only be permissible under CR 50.01 at the close of the defendant's proof. A party may move “for a directed verdict at the close of the evidence offered by an opponent.” CR 50.01. Thus, a plaintiff must properly wait until a defendant has presented its proof before requesting such a directed verdict. What CR 50.01 intends is to allow the party opposing the motion for directed verdict to have had an opportunity to present its proof prior to being foreclosed from doing such.

Id. at 634 (emphasis original) (footnote omitted).

In this case, the Hollands made their first directed verdict motion too early. To be proper, such motion should have been made after USAA closed its case. We recognize that prior to the Hollands’ motion, USAA indicated at a bench conference that it did not intend to call any witnesses, but USAA had not formally rested its case on the record nor had USAA formally waived any right to call any witnesses. In essence, USAA had not yet closed its evidence at the time the Hollands made their first motion for directed verdict. Thus, being made too soon, that directed verdict motion was procedurally deficient and properly denied.

Additionally, the Hollands’ first directed verdict motion was specifically made as to “the limited issue of coverage.” In their brief, the Hollands claim that the directed verdict motion should have been granted because their evidence satisfied the elements of Wittmer. That is not what the Hollands asserted at trial. Whether coverage existed goes to only the first element of Wittmer. See Belt v. Cincinnati Insurance Co., 664 S.W.3d 524, 532 (Ky. 2022) (stating that in a bad faith action, evidence of a declaratory judgment ruling on coverage provided conclusive evidence to the jury that coverage existed under the policy, thereby satisfying the first Wittmer element).

In essence, the Hollands asked for a directed verdict as to only a single element of their KUCSPA claim, rather than the entirety of the claim. We believe a directed verdict motion made by a plaintiff can never be granted unless all elements of a claim are established, and no disputed issues of fact exist upon which reasonable minds could differ. A successful directed verdict motion necessarily requires the trial court to find that “a reasonable jury could only conclude that the moving party was entitled to a verdict.” Buchholtz, 977 S.W.2d at 27 (emphasis added). A favorable verdict for a defendant means the plaintiff failed to establish at least one necessary element of a claim. Thus, it is appropriate for a defendant to seek a directed verdict based on the failure to prove a single element of the whole. In contrast, a favorable verdict for a plaintiff means that the plaintiff successfully proved each and every element.

In the vast majority of cases, we examine directed verdict motions made by a defendant. When a directed verdict motion is made by a defendant, that defendant need only focus on one element of a plaintiff's claim because the failure of single element defeats the whole of the plaintiff's claim. Thus, a defendant may properly target its directed verdict motion at a single element. A plaintiff, however, must establish each and every element of a claim by the appropriate evidentiary standard.

Logically, a successful directed verdict motion for a plaintiff means that a reasonable jury could only conclude that the plaintiff had established each and every element of a claim. See Jasper v. Blair, 492 S.W.3d 579 (Ky. App. 2016) (affirming plaintiff's directed verdict motion on her conversion claim after examining the proof as to each element). Here, the Hollands only sought a directed verdict as to one element of Wittmer. Therefore, this is another reason why the Hollands’ first directed verdict motion was procedurally deficient and properly denied.

Furthermore, even if the Hollands had been granted a directed verdict on the issue of coverage, they failed to meet their burden of proof on the two remaining elements of Wittmer as evidenced by the jury's response to Interrogatory No. 1. Because the Hollands were required to prove all three Wittmer elements to prevail on their KUCSPA and common law claims, any error by the trial court in denying their motion for a limited directed verdict was harmless. CR 61.01 states in relevant part, “[t]he court at every stage of the proceeding must disregard any error or defect in the proceeding which does not affect the substantial rights of the parties.” Therefore, any error in relation to the trial court's decision to submit the question of coverage to the jury, if any error did exist, is rendered harmless by the jury's finding that the Hollands failed to establish the second and third prongs of Wittmer under Interrogatory No. 1.

2. Second Motion for Directed Verdict

Though the Hollands only cite to their first motion for directed verdict in the preservation statement of their brief, their second motion for directed verdict (which purportedly applied to both their KUCSPA and KCPA claims) could not have salvaged their first directed verdict motion because the second motion is also deficient as it lacks specificity.

While the second motion for directed verdict was made after the close of USAA's case (thus procedurally at the correct time), CR 50.01 requires that a directed verdict motion “shall state the specific grounds therefore.” As explained in Gulf Oil Corporation v. Vance, 431 S.W.2d 864, 865 (Ky. 1968):

[t]he purpose of the rule is to apprise fairly the trial judge as to the movant's position and also to afford opposing counsel an opportunity to argue each ground before the judge makes his ruling. The attention of the trial judge can thus be focused on possible reversible errors which might otherwise be obscure with only a general motion for a directed verdict.

Indeed, as our Supreme Court has observed, “[w]hen a bare motion for directed verdict is made, it obviously violates CR 50.01 because there is no specificity as the rule requires.” Fischer v. Fischer, 348 S.W.3d 582, 587 (Ky. 2011), abrogated on other grounds by Nami Resources Co., L.L.C. v. Asher Land and Mineral, Ltd., 554 S.W.3d 323 (Ky. 2018). Furthermore, “[i]n the absence of a statement of the specific grounds for a motion for a directed verdict [an appellate court] normally will not ․ question ․ the denial of the motion.” Carr v. Kentucky Utilities Co., 301 S.W.2d 894, 897 (Ky. 1957) (emphasis omitted).

In their second motion for directed verdict, the Hollands did not state with specificity how the proof at trial established the elements of any claim. Instead, the Hollands’ entire argument consisted of two sentences:

Judge, if I could just backtrack for just a moment? Instead of waiving a motion for JNOV and a new trial and all of that, I would like to make a motion for directed verdict on behalf of the plaintiff on the Unfair Settlement Claims Practices Act, also the Consumer Protection Act based upon the admissions by the parties about the false conduct by [USAA's engineer], about the coverage payments, and about the unreasonableness of withholding the payment of the coverage. So we just make a directed verdict motion for the record.

VR 08/28/23 at 1:46:24 p.m.-1:47:00 p.m. Vague references to admissions by the parties, coverage payments, and withholding payment do not set out with specificity which admissions by parties or what improper conduct by USAA the Hollands rely upon in their motion, let alone how those admissions or improper conduct satisfy which element of either the KUCSPA or the KCPA claims. In essence, the Hollands’ second directed verdict motion was admittedly a “placeholder” made to prevent waiver of a future motion for JNOV where the arguments would be spelled out with greater specificity. Because that specificity is actually required when the directed verdict motion is first made, the trial court properly denied the Hollands’ second directed verdict motion.

3. JNOV Motion

The Hollands also argue their directed verdict argument was preserved by their JNOV motion and in the arguments on that motion before the trial court. We disagree.

The purpose of JNOV is to allow the trial court to “retroactively grant the relief that should have come in the form of a directed verdict.” Savage v. Three Rivers Medical Center, 390 S.W.3d 104, 112 (Ky. 2012). In other words, “[i]f a trial court improperly refuses to direct the verdict [in favor of the moving party], JNOV would certainly be appropriate.” Id. (emphasis added). In this case, the trial court properly denied the Hollands’ first motion for direct verdict because it was made too early and only applied to one element rather than a whole claim.

Likewise, the second motion for directed verdict was properly denied. Because the Hollands failed to state the grounds for their second motion for directed verdict with specificity, the motion is treated as though it was not made at all. Commonwealth v. Ragland Potter Co., 305 S.W.2d 915, 917 (Ky. 1957). Given the Hollands’ JNOV motion was “wholly dependent and [was] based upon the erroneous overruling of a motion for a directed verdict,” the trial court correctly denied the JNOV motion as there was, in effect, no directed verdict motion. Id. Thus, the trial court's conclusion to deny the Hollands’ JNOV motion was correct though based on reasons other than those set forth above.

B. JURY INSTRUCTIONS

1. Preservation

The Hollands next claim the jury instructions were erroneous as to their KCPA claim, as those instructions (specifically Interrogatory No. 24) required an additional finding of causation not required by the statute. Before we examine the merits of the Hollands’ argument, USAA claims the Hollands failed to preserve this issue by failing to object to Interrogatory No. 24 at trial. Thus, we must first determine whether the Hollands preserved their objection.

CR 51(3) provides:

[n]o party may assign as error the giving or failure to give an instruction unless he has fairly and adequately presented his position by an offered instruction or by motion, or unless he makes objection before the court instructs the jury, stating specifically the matter to which he objects and the ground or grounds of his objection.

An appellant loses the right to argue jury instructions are deficient or incorrect “by failing to object to the language of the instruction or to submit an alternative instruction [on a claim] which might be more suitable.” Burke Enterprises v. Mitchell, 700 S.W.2d 789, 792 (Ky. 1985).

In reviewing the record, we note two instances where the Hollands objected to inclusion of language regarding substantial factor causation; however, both objections were to substantial factor causation language as applied to their bad faith claim, not the KCPA claim.⁴ Interrogatory No. 24 in the final jury instructions applied a substantial factor causation to all the Hollands’ claims. Therefore, because the Hollands objected to the substantial factor causation language specifically as it appeared in Interrogatory No. 24, and that language applied to both the KUCSPA and KCPA, we will find the Hollands have preserved the issue.

2. Substantial Factor Language

Having found the Hollands preserved the issue, we now turn to the merits of their argument, namely was Interrogatory No. 24 erroneous because it applied a substantial factor causation requirement to their KCPA claim. Indeed, the Hollands’ proposed jury instructions regarding the KCPA claim did not include any causation language at all. The Hollands’ proposed instructions asked the jury if USAA “[e]ngaged in unfair, OR false OR misleading, OR deceptive practices in handling the Hollands’ Claim” (emphasis original), and if the jury answered in the affirmative, the jury was directed to award damages without first finding causation.

We begin by looking at the plain language of the KCPA. KRS 367.170(1) provides that “[u]nfair, false, misleading, or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.” That statute, however, does not create a right of action in and of itself. Instead, KRS 367.220(1) establishes a private right of action for persons stemming from a violation of KRS 367.170(1). KRS 367.220(1) provides in relevant part:

Any person who purchases or leases goods or services primarily for personal, family or household purposes and thereby suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or practice declared unlawful by KRS 367.170, may bring an action under the Rules of Civil Procedure in the Circuit Court in which the seller or lessor resides or has his principal place of business or is doing business, or in the Circuit Court in which the purchaser or lessee of goods or services resides, or where the transaction in question occurred, to recover actual damages. The court may, in its discretion, award actual damages and may provide such equitable relief as it deems necessary or proper.

(Emphasis added.)

Looking at the plain language of KRS 367.220(1), for a plaintiff to succeed in a private action under the KCPA, it is not enough to establish that a defendant violated KRS 367.170(1), i.e., that a defendant engaged in “unfair, false, misleading, or deceptive acts.” In addition, a plaintiff must prove an ascertainable loss as a result of those acts. In other words, the ascertainable loss must be caused by those acts. Federal cases interpreting the KCPA have come to the same conclusion. See, e.g., Corder v. Ford Motor Corp., 869 F. Supp. 2d 835, 838 (W.D. Ky. 2012) (“[T]he plain meaning of the KCPA damages provision requires only a showing of a causal nexus between the plaintiff's loss and the defendant's allegedly deceitful practice, not a strict showing that the plaintiff relied on the defendant's allegedly deceitful practice.”); M.T. v. Saum, 7 F. Supp. 3d 701, 706 (W.D. Ky. 2014) (granting summary judgment to defendants as plaintiffs did not establish a causal nexus between unfair, false, misleading or deceptive claims in defendant's promotional materials and the plaintiff's injuries).⁵ Therefore, it is clear that proper jury instructions should require the jury to find a causal nexus between the wrongful acts and any ascertainable loss.

Having decided the KCPA requires the jury to find a causal nexus between wrongful acts and ascertainable loss, the next question is whether the jury instructions in this case presented the jury with the correct test for that causal nexus. The Hollands claim the substantial factor test cannot apply to the KCPA because Kentucky law only applies a substantial factor test to determine legal causation in a personal injury negligence claim. We disagree.

The substantial factor test was adopted in 1980 from Restatement (Second) of Torts § 431 (Am. Law. Inst. 1965) as part of the test to determine legal causation in negligence cases. Gonzalez v. Johnson, 581 S.W.3d 529, 533-34 (Ky. 2019) (citing Deutsch v. Shein, 597 S.W.2d 141 (Ky. 1980), abrogated on other grounds by Osborne v. Keeney, 399 S.W.3d 1 (Ky. 2012)). Under that test, “[t]he actor's negligent conduct is a legal cause of harm to another if (a) his conduct is a substantial factor in bringing about the harm, and (b) there is no rule of law relieving the actor from liability because of the manner in which his negligence has resulted in the harm.” Deutsch, 597 S.W.2d at 144.

Traditionally “causation” in negligence cases consisted of finding two types of causation, cause-in-fact and “legal or consequential causation.” Lewis v. B&R Corp., 56 S.W.3d 432, 437 (Ky. 2001). As explained in Lewis, “[c]ause-in-fact involves the factual chain of events leading to the injury; whereas, consequential causation concerns the concepts of foreseeability and the public policy consideration on limiting the scope of responsibility for damages.” Id. Those two tests have been combined as “legal cause.” The “substantial factor” test subsumes the cause-in-fact component. Id.

“Substantial factor” means that “the defendant's conduct has such an effect in producing the harm as to lead reasonable men to regard it as a cause ․” Restatement (Second) of Torts § 431 cmt a. Thus, a defendant's conduct “need not be the sole cause or even the primary cause” of a plaintiff's injury but must only be “a material element.” 57 Am. Jur. 2d Negligence § 443 (2022). Furthermore, the substantial factor test has been applied to torts other than negligence. See Jasper, 492 S.W.3d at 583 (applying Restatement (Second) of Torts § 443 and Deutsch, 597 S.W.2d at 144 to the legal causation element for conversion).

The KCPA requires a causal nexus to show a plaintiff's ascertainable loss was the result of the defendant's wrongful conduct. In other words, the plaintiff must show the wrongful conduct was the cause-in-fact of his ascertainable loss. We believe the substantial factor test is appropriate to determine that causal nexus. Thus, the trial court did not err by including the substantial factor language in Interrogatory No. 24.

C. PREVAILING PARTY

Finally, the Hollands claim the trial court erred in finding USAA the prevailing party under the KCPA. First, the Hollands claim they prevailed because the jury found USAA engaged in acts proscribed by the KCPA. Second, the Hollands claim prevailing party status because their breach of contract claim was settled through mediation for the amount they demanded. We disagree with both points.

With regards to attorney's fees in a KCPA action, KRS 367.220(3) provides “[i]n any action brought by a person under this section, the court may award, to the prevailing party, in addition to the relief provided in this section, reasonable attorney's fees and costs.” The term “prevailing party” is not defined, but a prior panel of this court has interpreted that phrase to mean the “successful litigant, whether plaintiff or defendant[.]” Aesthetics, 339 S.W.3d at 498.

While the jury may have believed USAA engaged in acts that violated KRS 367.170(1), that alone does not make the Hollands the prevailing party in their KCPA claim. The plain language of KRS 367.220(3) requires the prevailing party be the successful litigant of a claim brought under that section. The KCPA claim is actually established by KRS 367.220(1) which, as described, supra, requires not only proof that a defendant engaged in acts violating KRS 367.170(1) but also proof of a causal connection between those acts and an ascertainable loss suffered by the plaintiff. Here, the jury found the Hollands did not establish that causal connection; thus, the Hollands cannot be the prevailing party on their KCPA claim.

Nor do we agree that settlement of their breach of contract claim entitles the Hollands to prevailing party status even if the claim settled for an amount close to that originally demanded by the Hollands. The United States Supreme Court has described a “prevailing party” as “one who has been awarded some relief by the court.” Buckhannon Bd. and Care Home, Inv. v. West Virginia Dep't of Human and Health Resources, 532 U.S. 598, 603, 121 S. Ct. 1835, 1840, 149 L. Ed. 2d 855 (2001) (emphasis added).⁶

In the present case, the trial court awarded no relief to the Hollands on their contract claim; instead, any relief on their contract claim comes from the settlement agreement reached by both parties. Once the Hollands agreed to dismiss that claim with prejudice, the Hollands’ only future relief would be an action to enforce the settlement agreement, if necessary. The original contract claim, however, was extinguished without any determination on the merits by the trial court.

Furthermore, as aptly stated in Childs v. Hamilton, 308 Ky. 203, 214 S.W.2d 106, 108 (1948), “[t]he courts have long looked with favor upon settlements which put an end to extended litigation.” To accept the Hollands’ position would be to invite parties to litigate which party was the prevailing party long past the time such claims should be settled. Indeed, accepting the Hollands’ argument may discourage parties from settling or entering into partial settlements of claims for fear that they may later have to litigate prevailing party claims. Thus, we agree with the trial court that USAA was the prevailing party in this case.

IV. CONCLUSION

The trial court properly denied both motions for directed verdict made by the Hollands as they were procedurally deficient. Furthermore, the jury instructions were not erroneous because the KCPA requires a finding of causation to establish a private right of action and the substantial factor test is appropriate. Finally, the trial court correctly designated USAA as the “prevailing party” under the KCPA because the Hollands failed to prove their KCPA claim, and they agreed to dismiss their breach of contract claim prior to trial.

We view any remaining contentions of error as moot, unpersuasive, unpreserved, or without merit.

Thus, for the foregoing reasons, the judgment of the Mercer Circuit Court is affirmed.

FOOTNOTES

2.   The whole of the Hollands’ motion is as follows: “Your Honor, we move for a directed verdict on the limited issue of coverage. I believe [counsel for USAA] acknowledged as much when he was arguing for directed verdict. So, we just ask the court to enter directed verdict on that one issue.” Video Record (VR) 08/28/23 at 1:34:26 p.m.-1:34:41 p.m.

3.   The whole of the Hollands’ second directed verdict motion is as follows: “Judge, if I could just backtrack for just a moment? Instead of waiving a motion for JNOV and a new trial and all of that, I would like to make a motion for directed verdict on behalf of the plaintiff on the Unfair Settlement Claims Practices Act also the Consumer Protection Act based upon the admissions by the parties about the false conduct by [USAA's engineer], about the coverage payments, and about the unreasonableness of withholding the payment of the coverage. So, we just make a directed verdict motion for the record.” VR 08/28/23 at 1:46: 24 p.m.-1:47:00 p.m.

4.   First discussing the parties’ tendered jury instructions, and discussing USAA's Second Amended Tendered Jury Instruction Interrogatory No. 9 (which had very similar language to the final Interrogatory No. 24), counsel for the Hollands argued:The next instruction we take issue with is Interrogatory No. 9. It is a substantial factor ․ it is a causation instruction you would see in a personal injury case alleging negligence. That's not the standard in a bad faith case. We have excluded any substantial factor language in [our proposed jury instructions].VR 08/28/23 at 2:16:20 p.m.-2:16:46 p.m. (emphasis added).Later, after the trial court presented the parties with its final set of jury instructions, counsel for the Hollands argued:Just for the record, Your Honor, the Plaintiffs object to Interrogatory No. 24, requiring the jury to find that there is a substantial factor in causing the damages. That's a standard for a negligence personal injury case, and not a bad faith claim.VR 08/29/23 at 1:14:32 p.m.-1:14:51 p.m. (emphasis added).

5.   Moreover, a prior panel of this Court, in an unpublished opinion, observed that “[a] KCPA claim is conduct driven and requires the plaintiff to establish a nexus between the wrongful conduct and his loss.” Complete Automotive Repair Services v. Capps, No. 2012-CA-002145-MR and No. 2012-CA-002177-MR, 2015 WL 2445911, at *7 (Ky. App. May 22, 2015).

6.   Furthermore, a separate panel of this Court in an unpublished decision observed that when parties voluntarily dismiss a claim, “such a dismissal is not a finding on the merits of the claim, a finding necessary before one party can be said to have prevailed.” Haroon v. Kerwin, No. 2011-CA-001299-MR, 2013 WL 3105545, at *5 (Ky. App. Jun. 21, 2013).

JONES, L., JUDGE:

ALL CONCUR.