Kentucky Appeals Court Outlines Limitations on Stigma Damages
Illustrating the limitations on so-called “stigma” damages under Kentucky law, Kentucky appellate court ruled that a claim for stigma damages is not an independent cause of action, and that such damages are not available in addition to the cost to remediate a contaminated property. Muncie v. Wiesemann, 2015-CA-001788-MR (Ky. Ct. Appl April 21, 2017).
The case stems from a 2010 leak from a home heating oil tank onto Cindy and Jim Muncie’s property. Oil-contaminated water entered the Muncies’ sump pump, which later failed, flooding their basement with petroleum-contaminated water. Over the next year, the Kentucky Division of Waste Management declared the site an environmental emergency and ordered and oversaw expedited remediation efforts, finally declaring that the site required no additional remediation in December of 2011. In 2013, the Muncies, the tank owner, and other parties settled a suit for allocation of insurance payouts, but the settlement did not include claims by the Muncies to assert “the diminution of the value of their real estate due to the stigma resulting from the contamination.” A month later, the Muncies filed suit in state court against the tank owner, alleging stigma damages. The trial court granted the defendant’s motion for summary judgment, finding that a claim for stigma damages is not an independent cause of action and that such damages are not available when the landowner has already been compensated for remediation.
On the Muncies’ appeal, the appellate court affirmed the lower court’s decision and reiterated the Kentucky Supreme Court’s holding in Smith v. Carbide & Chems. Corp., 226 S.W.3d 52 (Ky. 2007). As a matter of law, actual damage to real property includes damages caused by stigma or reputational harm. Even when this damage is not included explicitly in the calculation, reputational damage does not stand as an independent suit for recovery. The court further held that allowing any recovery for reputation in addition to damages for actual harm to the property would result in an inappropriate double recovery for the injured party, even accounting for the fact that the 2013 settlement explicitly contemplated a future suit on reputation.