BIG SANDY REGIONAL DETENTION CENTER APPELLANT v. KENTUCKY ASSOCIATION OF COUNTIES ALL LINES FUND TRUST APPELLEE (2026)

OPINION AFFIRMING

Big Sandy Regional Jail Authority (“Big Sandy”) appeals from an Opinion and Order of the Franklin Circuit Court granting summary judgment in favor of Kentucky Association of Counties All Lines Fund Trust (“KALF”) and dismissing Big Sandy's declaratory judgment action. The dispute arises from KALF's denial of a claim Big Sandy submitted under a Property, Liability, and Defense Policy (“Policy”) seeking coverage for damage allegedly sustained by the Big Sandy Regional Detention Center following a severe snow and rain event in 2015.

On appeal, Big Sandy argues that the circuit court improperly resolved disputed issues of fact concerning the cause of the damage. Big Sandy contends that water entering through a damaged roof washed away supporting soils beneath the jail, causing the structure to settle and crack. KALF responds that regardless of the precise mechanism that caused the damage, the losses claimed by Big Sandy fall within the Policy's unambiguous exclusions for damage from settling, cracking, and defective construction.

After careful review of the record, the Policy, and the applicable law, we agree with the circuit court that no genuine issue of material fact exists regarding the applicability of the Policy's exclusions. Even accepting the opinions of Big Sandy's expert as true, the damage for which coverage is sought was caused, directly or indirectly, by conditions expressly excluded under the Policy. Accordingly, we affirm.

I. Background

Big Sandy operates the Big Sandy Regional Detention Center (“the Jail”) in Paintsville, Kentucky. The Jail was constructed in approximately 1987 and consists primarily of a concrete block structure built upon a concrete slab foundation. KALF issued an insurance policy that provides coverage for certain property damage.

In early 2015, a severe snow and rain event deposited substantial accumulations of snow on the Jail's roof. As temperatures increased and heavy rain fell, the snow melted, and water infiltrated the building through the roof. Employees observed water running down interior walls and, around the same time, they also noticed cracking in portions of the building's walls, floors, and ceilings. KALF accepted and paid Big Sandy's claim for damage directly related to the roof failure, and the roof membrane was subsequently replaced. The damages at issue in this appeal do not involve that claim.

Instead, this appeal concerns a separate claim Big Sandy submitted, seeking coverage for damage allegedly sustained to the Jail's foundation and structure, including cracking in the walls and floors, which Big Sandy attributed to subsurface soil loss beneath the building. KALF denied coverage, asserting that the claimed losses were excluded under the Policy.

In 2018, Big Sandy filed a declaratory judgment action in the Johnson Circuit Court seeking a determination that the Policy covered the disputed damages. Pursuant to a forum-selection provision contained in the Policy, the action was transferred to the Franklin Circuit Court. The parties agreed to bifurcate the proceedings and litigate liability before addressing damages. Thereafter, both parties moved for summary judgment. By Opinion and Order entered August 12, 2024, the Franklin Circuit Court denied Big Sandy's motion, granted KALF's motion, and dismissed the action. This appeal followed.

II. Standard of Review

In a case such as this “in which the trial court has granted summary judgment in a declaratory judgment action and no bench trial is held, we use the appellate standard of review for summary judgments.” Foreman v. Auto Club Property-Casualty Insurance Company, 617 S.W.3d 345, 349 (Ky. 2021). Summary judgment is appropriate where “the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” CR ¹ 56.03. “An appellate court's role in reviewing a summary judgment is to determine whether the trial court erred in finding no genuine issue of material fact exist[ed] and the moving party was entitled to judgment as a matter of law.” Feltner v. PJ Operations, LLC, 568 S.W.3d 1, 3 (Ky. App. 2018). The standard of review for an appellate court is de novo because only legal issues are involved. Isaacs v. Sentinel Ins. Co. Ltd., 607 S.W.3d 678, 681 (Ky. 2020).

III. Analysis

The Policy contains a Building and Personal Property Coverage Form providing that KALF “will pay for direct physical loss of or damage to covered property at a described premises caused by or resulting from any covered cause of loss.” The Policy defines a “Covered Cause of Loss” as “an occurrence resulting in direct physical loss unless the loss is: (a) excluded in Section B., Exclusions; or (b) limited in Section C., Limitations; that follow.” Section B of the Policy contains several exclusions relevant to this appeal:

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

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c. (4) settling, cracking, shrinking or expansion of pavements, foundations, walls, floors, ceilings, roofs or swimming pools.

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2. We will not pay for loss or damage caused by or resulting from any of the following:

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b. Faulty, inadequate or defective:

(1) planning, zoning, development, surveying, siting;

(2) design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction.

“The terms of insurance coverage should not be extended beyond any clear or unambiguous limit.” Masler v. State Farm Mut. Auto. Ins. Co., 894 S.W.2d 633, 635-36 (Ky. 1995). Likewise, “[a] policy must be enforced as written, with unambiguous terms.” Colemon v. Westport Insurance Company, 727 S.W.3d 371, 375 (Ky. 2025). Big Sandy does not argue that any provision of the Policy is ambiguous.

To be sure, “[b]ecause insurance companies most often prepare insurance contracts, policies should be construed against the insurer if an ambiguity arises.” Colemon, 727 S.W.3d at 380 (emphasis added). However, that rule “has no application to a term so clearly defined in the policy as to exclude coverage under the circumstances involved in the case.” Aetna Life & Cas. Co. v. Layne, 554 S.W.2d 407, 409 (Ky. App. 1977).

The parties retained competing engineering firms to evaluate the cause of the damage. KALF retained Rimkus Consulting Group, Inc. (“Rimkus”), whose engineer, Amanda Moore-Roberson, concluded that the damage resulted from long-term settlement and construction-related deficiencies associated with substandard or improperly compacted fill beneath the building. Big Sandy retained Consulting Services, Inc. (“CSI”), whose geotechnical engineer, York Little, rejected the construction-defect theory and instead opined that water entering through the damaged roof washed silt and clay from beneath the building, creating voids that caused portions of the structure to settle and crack.

Thus, the experts disagreed regarding how the loss of support beneath the building occurred. But they did not materially disagree regarding the mechanism by which the claimed damage was ultimately sustained. As Big Sandy acknowledges in its brief, CSI agreed that “the ultimate cause of the damage to the building was the loss of the support by the fill upon which the building was constructed[.]” CSI further concluded that the washing away of silt and clay “leav[es] voids beneath the building that allowed undue settlement of the building.” Appellant's Brief at 5-6. In short, the experts disagreed about what caused the settlement. They nevertheless agreed that the damage claimed resulted from settlement.

The circuit court carefully considered both theories. In evaluating KALF's motion for summary judgment, the court properly viewed the evidence in the light most favorable to Big Sandy and accepted Engineer Little's opinions as true. Even under that version of the facts, however, the circuit court concluded that the damage claimed by Big Sandy fell within the Policy's exclusion for losses caused directly or indirectly by settling and cracking. We agree.

Significantly, both experts ultimately attributed the claimed damage to settlement. Although Engineer Little believed that water entering through the damaged roof accelerated the process, he concluded that the resulting loss was due to the removal of supporting soils beneath the structure, allowing the building to settle and crack. Indeed, the circuit court observed that even under Engineer Little's theory, water could only have escaped beneath the building through preexisting cracks or a damaged drainpipe, conditions he acknowledged were themselves attributable to settlement. Consequently, regardless of whether the settlement developed gradually over time or was accelerated by the 2015 storm, the claimed damages were caused, at least indirectly, by settlement and cracking.

Big Sandy nevertheless argues that the 2015 storm was a substantial factor in causing the loss and, therefore, that coverage exists. In support, it relies upon authorities addressing causation principles in negligence actions. The flaw in that argument is that this case does not arise in tort. It is a contract dispute governed by the Policy's terms. State Farm Mut. Ins. Co. v. Fireman's Fund Am. Ins. Co., 550 S.W.2d 554, 557 (Ky. 1977) (“[A]n insurance policy is a contract, and insofar as it does not contravene the law any recovery against the insurance company is governed solely by its terms.”).

Had this been a negligence action, the question might well be whether the storm constituted a substantial factor in producing the damage. But the parties did not contract for coverage based upon tort-law concepts of causation. Instead, they agreed that losses caused “directly or indirectly” by settling and cracking would be excluded from coverage and that the exclusion would apply “regardless of any other cause or event that contributes concurrently or in any sequence to the loss.”

Thus, even assuming the 2015 storm contributed to the damage, the Policy expressly provides that such concurrent or sequential causes do not restore coverage when an excluded cause also contributed to the loss. The parties’ experts disagree about whether the storm accelerated the settlement process. They do not materially disagree that settlement and cracking were part of the causal chain that produced the damage for which Big Sandy seeks coverage. As the circuit court correctly concluded, under the plain language of the Policy, that is enough to trigger the exclusion.

IV. Conclusion

For the foregoing reasons, we conclude that the Franklin Circuit Court properly determined that no genuine issue of material fact exists and that KALF is entitled to judgment as a matter of law. Because the damage for which Big Sandy seeks coverage falls within the Policy's unambiguous exclusions, the Opinion and Order of the Franklin Circuit Court is AFFIRMED.

FOOTNOTES

1.   Kentucky Rules of Civil Procedure.

JONES, A., JUDGE:

ALL CONCUR.