A Kentucky jury ordered this insurance company to pay $15.3 million. It will appeal.

Oct. 08--SALYERSVILLE -- An insurance company ordered by a Magoffin County jury to dish out $15.3 million to the heirs of a Saylersville family will appeal, the company's attorney said, further extending an 11-year legal battle that likely involves the largest bad-faith insurance verdict in the state's history.

The jury handed down the verdict late last month, compelling the company to pay the heirs of a family that owned mineral rights for a Magoffin County property where two drilling companies wrongfully extracted about $1.3 million of natural gas more than a decade ago, according to documents filed in the case.

In 2007, about 80 people who inherited mineral rights to the property brought the case against natural gas drilling companies J.D. Carty Resources, LLC., and Anaconda Drilling, LLC., for wrongfully extracting and selling natural gas from the land, according to court records.

Austin Mehr, a Lexington attorney who represents the mineral rights owners, said the companies drilled several wells on the property, beginning around 2004 and continuing through 2007.

While most of the wells retrieved miniscule amounts of gas, one extracted about $1.3 million worth, he said.

J.D. Carty reached an agreement in 2008 to pay the owners for the gas, but failed to pay, said Philip Fairbanks, at attorney who works at the same firm as Mehr.

Carty could not be reached for comment.

When Carty failed to pay, the liability for payments fell to Greenwich Insurance Company, which held a policy with Carty, Fairbanks said.

The insurance company, however, argued in court that its policy with Carty did not cover the damages caused by the removal of the gas, so it refused to pay.

The case slogged along until last year, when the court retrieved internal documents from Greenwich that allegedly showed the company's policy with Carty covered trespassing cases, Mehr said.

Mehr argues the trespassing clause makes the company liable for damages, but Susan Maines, who represents Greenwich, said there was "no statement in any internal documents that ever said there was coverage for the damages."

"Obviously we fully disagree with that conclusion," Maines said of the jury decision. "We fully expect it to be overturned."

Mehr and Fairbanks said the internal documents -- which include an opinion letter recommending that the company provide coverage -- show the company knew its policy covered the damages, but that Greenwich "intentionally misrepresented" the details of its policy to Carty and the court.

"The proof we put on at trial was they weren't disclosing to J.D. Carty what they knew internally, that he had coverage," Fairbanks said.

In addition, Mehr said the company sought ways to delay the case, including two attempts to move the case to federal court. "They just delayed it at every turn," Mehr said.

Mehr has previously represented clients in at least a dozen bad-faith insurance cases in Kentucky, including one $4.4 million case in Kenton County, according to Mehr's profile on the Mehr, Fairbanks & Peterson Trial Lawyers website.

The $15.3 million verdict is "a new high mark" for Mehr, but he said the case might also be the largest bad-faith insurance claim in Kentucky history.

Maines, also based in Lexington, said Greenwich will appeal the case. It could be 18 months or more before a ruling is issued in that appeal, she said.

Will Wright is a corps member with Report for America, an initiative of The GroundTruth Project. Reach him at 859-270-9760, @HLWright

___

(c)2018 the Lexington Herald-Leader (Lexington, Ky.)

Visit the Lexington Herald-Leader (Lexington, Ky.) at www.kentucky.com

Distributed by Tribune Content Agency, LLC.