Kentucky Tort Report

INSURANCE: WORKERS COMP SUBROGATION AGAINST UNDERINSURED MOTORIST BENEFITS

G & J PEPSI-COLA BOTTLERS, INC. v. FLETCHER
INSURANCE:  WORKERS COMP SUBROGATION AGAINST UNDERINSURED MOTORIST BENEFITS
2003-CA-000129
PUBLISHED: AFFIRMING
PANEL: KNOPF, PRESIDING; KELLER, NICKELL CONCUR
COUNTY: BOURBON
DATE RENDERED: 7/13/2007

In this case, the COA held that a workers compensation carrier has no subrogation claim against the claimant's underinsured motorist benefits.

The single question in this appeal is whether the Circuit Court erred in summarily dismissing the subrogation claim of appellant, G&J Pepsi-Cola Bottlers, Inc., for workers' compensation benefits paid to appellee, Nicholas Fletcher. This appeal was held in abeyance pending resolution by the Supreme Court of Kentucky of the issues advanced in Cincinnati Insurance Company v. Samples, 192 S.W.3d 311 (Ky. 2006). Having fully considered those supplemental briefs, the original briefs filed in this appeal, and the record, the COA affirmed the circuit court dismissal.

Fletcher was seriously injured in a car accident and received workers compensation benefits. Fletcher sued Urmson, the at fault driver, and Ohio Casualty, his personal automobile insurance carrier, for underinsured motorist's (“UIM”) benefits. Fletcher subsequently amended his complaint to add a UIM claim against United States Fire Insurance Company (“US Fire”), the insurer of his employer G&J's fleet of vehicles. Finally, G&J intervened to assert a $370,000.00 subrogation claim for workers' compensation benefits paid to Fletcher as a result of the same automobile accident.

The primary issue became whether G&J could assert a subrogation claim against the benefits Fletcher was seeking from US Fire and Ohio Casualty. COA answered no.

Relying upon the language of KRS 342.700(1) and the rationale set out in State Farm Mutual Insurance Company v. Fireman's Fund American Insurance Company, 550 S.W.2d 554 (Ky. 1977), the circuit court concluded that the employer's statutory subrogation rights extend only to recovery of benefits paid “from the other person in whom legal liability for damages exists” in other words, the tortfeasor.

Applying the holding in State Farm, the trial court noted that the payment of benefits by a UIM carrier is the performance of a contractual obligation, not the payment of damages by the person in whom legal liability rests. Thus, the trial court granted the motion for summary judgment because it found no case or statute which would permit G&J to assert its subrogation claim against the amounts paid under the two separately purchased UIM policies.

The COA first prefaced it discussion of the merits of G&J's appeal with a reiteration of the the analysis set out in State Farm v. Firemen's Fund concerning the nature of UIM benefits and the genesis of an employer's subrogation rights. The following analysis was from that earlier UM decision, and since the appellate courts analyze UIM and UM similarly, the Judge Knopf's analysis is addressed (as it incorporates the analysis from Justice Palmore):

KRS 342.055 [now KRS 342.700(1)], the subrogation statute, provides that “the other person in whom legal liability for damages exists” quite clearly refers to the third-party tortfeasor who is liable at common law. A payment made in performance of a contractual obligation is not a payment of “damages.” Hence the liability of an insurance company under its uninsured motorist coverage cannot be the “legal liability for damages” mentioned in KRS 342.055.

Moreover, the satisfaction of an injured party's claim by his own insurance company under its uninsured motorist coverage does not inure to the benefit of the uninsured motorist. His liability is not extinguished, and it may be enforced by both the carrier which has paid workmen's compensation benefits and the carrier which has paid under the uninsured motorist coverage.

To hold that the contractual rights of an insured party under the uninsured motorist clause of an automobile liability insurance policy must inure to the benefit of a workmen's compensation carrier to the extent of compensation paid or payable to him would confer upon the compensation carrier an additional right which it does not have under the subrogation statute. The injured party, or the person under whose insurance policy he is defined as an “insured,” has no obligation to his employer's compensation carrier to carry any automobile liability insurance or underinsured motorist benefits whatever.

In the absence, therefore, of a statute or agreement to the contrary, what can be the source of the compensation carrier's right to have the benefits of such insurance? The answer, we think, is that there is none.

Judge Knopf also emphasized that this result does not deprive the employer of its subrogation rights; it can still look to the tortfeasor as provided for in KRS 342.700(1).

The import of that distinction is that KRS 342.700 operates as “a limitation on the rights of the worker that is attendant to his right to collect workers' compensation benefits” and is not a defense personal to the tortfeasor.

The purpose and intent of the uninsured and underinsured motorist statute is to treat the insured victim as if the tortfeasor is insured. Hence, the UM and UIM carrier stands in the wrongdoer's shoes for purposes of paying damages.

KRS 304.39-320(2) requires “every insurer” to make available upon request UIM coverage to pay “for such uncompensated damages as he may recover on account of injury due to a motor vehicle accident because the judgment recovered against the owner of the other vehicle exceeds the liability policy limits thereon . . . .”

In other words, the UIM carrier is liable only for damages for which the insured would have been compensated but for the fact that the tortfeasor was underinsured. It follows that if the underinsured tortfeasor could not be held liable for an item of damages, that item is not “uncompensated damages” payable by the UIM carrier.

The UIM carrier is liable for damages only to the extent to which the underinsured tortfeasor is or could have been held liable.

Thus, it is clear that the holding in Samples is directed to the question of what damages an injured employee may recover from his own or his employer's UIM carrier; it neither addresses nor changes the law regarding an employer's subrogation rights as set out in State Farm v. Fireman's Fund.

The COA noted that while Samples makes clear that the UIM carrier's liability is measured by the liability of the tortfeasor, it does not follow that payments made under a UIM contract are the payment of legal damages in the traditional sense. While the UIM carriers may stand in the shoes of the tortfeasor for the sole purpose of making the injured party whole, the UIM contract does not provide an additional right of subrogation not provided for in KRS 342.700(1).

Because the COA concluded that as a matter of law G&J is not entitled to subrogation against the UIM carriers, there was no error in failing to conduct an evidentiary hearing to resolve a factual question.

By Michael Stevens

Nonpublished Decision enforcing mediation agreement with unilateral mistake holds PIP carrier feet to the fire. Can the underlying prohibition against splitting causes of action be extended to other areas of the law?

I copied my post en toto from the Kentucky Law Blog/Review since it is classic tort and insurance subject - Nonpublished COA Decision Upholds Mediation Agreement Even Though Insurer forgot about the PIP - Epling v. Lib. Mutual Ins. Co..  Although the decision is directly applicable to a settlement agreement, the underlying pricipals involving a single cause of action and its implications on a settlement might/should apply with equal force on first party claims with a bad faith count included.  A single cause of action has come into play in statutes of limitations, property damage vs.personal injury, and now settlement agreements.  Can it have force in UIM advances  and bad faith scenarios?

In Epling, the decedent's estate pursued a claim for the decedent's wrongful death in a car accident asserting claims against the tortfeasor and the decedent's underinsured motorist carrier, Liberty Mutual.  Liberty Mutual had also paid a total of $70,000 in added and basic reparation benefits as a result of the accident.

At the mediation, the parties had settled as follows:

The settlement was allocated with $235,000 for the wrongful death of Hiram McCoy; $10,000 for personal injury to Hiram McCoy; and $10,000 to Barbara McCoy for loss of consortium. Liberty Mutual contributed $5,000 of the total payment of $255,000. After reciting allocation of the settlement amounts and in connection with the total payment to McCoy, the Agreement provides, “settlement proceeds are exclusive of PIP.” This language is commonly used in releases to clarify that no other claims, offsets or subrogation rights will reduce the Plaintiff’s receipt of the total settlement amount.

* * *

However, the Agreement provides that it includes “all parties” and “all claims.” Specifically, the Agreement states:

IT IS HEREBY AGREED by and between the parties hereto
that all claims contained therein between the parties to this
Agreement are fully and finally settled with the Plaintiff
receiving a total settlement of $255,000 from the defendants
in exchange for which the Plaintiff agrees to execute a full
and final Release of all claims including Underinsured
Motorist Claims (UIM) against said Defendants arising out of
this litigation and an entry of dismissal with prejudice, with
each party to this litigation paying the parties respective court
cost and attorneys fees. (Emphasis added).

* * *

Unfortunately, Liberty Mutual’s counsel was unaware of [pip] these payments and did not raise subrogation issues during mediation. Nor had Liberty Mutual’s counsel asserted any subrogation rights after being sued. It is now clear that no cross-claim was made by Liberty Mutual against any party for recovery of basic or added reparation benefits because counsel for Liberty Mutual was simply unaware of these payments.

Liberty Mutual raised the unilateral mistake and the release agreement to effect the mediation settlement agreement hit a snag.

However, the COA held the unilateral mistake was not enough to get around the clear and unambiguous language of the mediation agreement which settled all claims of all parties and required a dismissal with prejudice.

In holding Liberty Mutual's feet to the fire for representations made by it and relied upon other parties, Judge Dixon writing for the panel stated:

The problem of this case arose when Liberty Mutual and its attorney were apparently unaware of the earlier payments. This mistake on Liberty Mutual’s part was a subjective mistake. If Liberty Mutual was allowed to proceed with the subrogation at this time, it would be in derogation of the settlement proceeding that guaranteed the $255,000 payment to McCoy. It would also violate the long established rule against splitting a cause of action. Kirchner v. Riherd, 702 S.W.2d 33 (Ky. 1985); Egbert v. Curtis, 695 S.W.2d 123 (Ky. App. 1985); and Hayes v. Sturgill, 302 Ky. 31, 193 S.W.2d 648 (1946). These cases acknowledge a long, well established history of pleading that requires all claims that arise out of the same facts to be litigated together. To hold otherwise would result in piecemeal litigation. This rule is essential to efficient management litigation (sic).

Now, if the law is a moving stream, then one can only assume, expect and hope that the stream flows smoothly and in the same direction after accounting for the natural eddies and changes in the current.  The courts have applied the rule against splitting a cause of action to statutes of limitation and now settlements, not to mention property damage claims and personal injury claims cannot be split either.

Now will the courts be consistent and that the "well established history of pleading that requires all claims that arise out of the same facts to be litigated together" apply with equal force and effect against the insurance company in a first party claim?  When an insured sues on a contractual uninsured/underinsured motorist claim, he is required by this rule to assert all claims (including statutory and common law bad faith).  If he/she is required to bring those claims, and there is obviously no prejudice to another party or tortfeasor, then there really should be no basis for splitting the trial and join all claims to the jury as an "efficient management litigation (sic)."

The facts are the facts, and each party in a lawsuit must live with those actions and conduct.  The reasons for bifurcating a bad faith claim from a pure contractual first party claim don't hold water when compared to the underlying third party claims and claims against a tortfeasor identified at trial. 

Now this adds another twist of the screw when the "official" reason for "advancing" funds under KRS 304.39-320 and Coots v. Allstate is to preserve subrogation rights.

Would it be legitimate for an undersinsured motorist carrier to advance the liability limits when there are no assets upon which to assert or protect those subrogation rights and the "apparent" reason for advancement would thus be "trial strategy" (eg., identifying a tortfeasor to the jury as the person ultimately bearing financial responsibility for the verdict and to insure bifurcation of any bad faith claims)?

As most may know, this is a lot of speculation and thinking outside the box.  But the questions are nonetheless intriguing.

INSURANCE: COA Opinion Refines "Samples" Decision by Explaining Difference Between Contractual UIM Damages vs. Tort Injury Damages

COA Opinion Refines "Samples" Decision by Explaining Difference Between Contractual UIM Damages vs. Tort Injury Damages - KENTUCKY LAW BLOG

Failure to bifurcate first party insurance (UIM) claim from staturory bad faith claim is not an automatic error

The Kentucky Court of Appeals ruled recently in a non-published decision that it was NOT palapale error when the trial judge did NOT bifurcate the claim for statutory bad faith (unfair claims settlement practices act) from the underlying UIM/underinsured motorist claim.   

The case was American Commerce Ins. Co. v. Hall, 2005-CA-002183, COA, Apr. 6, 2007.  Senior Judge Buckingham wrote this decision for a unanimous panel of Stumbo and Lambert.

The significance of this decision is that all too often, trial judges have a knee-jerk reaction to an insurance company's bifurcation motion.  Well, bifurcation makes sense when you have a claim against the defendant driver tied in with a bad faith claim against either a third party or first party insurance company.   It sounds fair to the defendant that the liability claim should be held in abeyance and should not unfairly affect the claim of liability and damages against him.  Furthermore, the resolution of the underlying tort claim might even foreclose and preclude the bad faith claim.

However, bifurcation is problably not appropriate when there is no defendant driver in the suit and all the claims are against the insurer!

How and when does this happen.  Well, it happened here.  In the facts of this case,  the plaintiff's settled with the liability carrier (with presumable compliance under the Coots v. Allstate procedure), then sued the underinsured motorist carrier (American Family) for UIM or first party insurance benefits AND for violations of the Unfair Claims Settlement Practices Act.  Oddly enough, American Family did not answer, and liability was entered.  The matter was later tried on damages on both the UIM and the UCSPA claims and American Family still was not in attendance and the verdict exceeded the policy limits. 

Here.  The claims against the defendant resolved, and the only claims left were those for UIM and unfair claims.  When American Family learned of the verdict, it jumped in and tried to set it aside with one of the reasons being it was palpable error not to have bifurcated the contractual UIM claim from the tort of statutory bad faith.

American Family lost, and even though this set of facts is odd, the result is that bifurcating the contractual UIM claim from the UCSPA claim is not automatic and not palpable error to include thus giving judges some leeway in consolidating their dockets and putting pressure on the insurance companies not to deny, delay, and defend and maybe, just maybe, attempt to resolve these claims without the bifurcation card and its cocomitant expense of two, yes two, trials.

Insurance: Underinsured motorist benefits (UIM) - Single premium, multiple vehicles, no stacking

Kentucky Tort and Insurance Law Blog has analyzed a recent COA published decision addressing stacking of UIM and single premium policies - No Stacking UM When Single Premium Charged for Multiple Vehicles!

COAKY Decision Rules UIM Carrier to be identified even without Coots advancement - Earle v. Cobb extended - whither goest "insurance" and its "taint" at trial?

Judge Abramson writing for the Court of Appeals has extended the SCOKY decision of Earle v. Cobb (2000-SC-000818-DG.pdf) to require the identification of the underinsured motorist carrier (UIM) at trial even when the UIM carrier has not advanced the liability limits of the at-fault driver.  See, digest of decision at UIM (TRIAL IDENTIFICATION): STINSON V. MATTINGLY (COA 3/2/2007).  I commend Judge Abramson and this panel of the Court of Appeals by standing firm on a belief that if named a party, then welcome to the party - you will be identifed and cannot hide.

In Earle v. Cobb, the SCOKY held that the UIM company was the real party in interest and cannot be permitted to hide when it advances the liability limits since any verdict in excess of the liability limits would be the financial obligation of the individually named and at-fault defendant as an indemnity claim for the amounts paid to the plaintiff by the UIM carrier.

In Stinson v. Mattingly, a published decision in which discretionary review will probably be sought, the plaintiff had filed suit against the at-fault driver and the plaihtiff's own UIM carrier.  There was no settlement between the plaintiff and the at-fault driver/defendant, so there was no tender or advancement of the UIM limits per Coots (although Coots v. Allstate is the case on point, its procedures for UIM and liability settlements was codified in KRS 304.39.320) .  Prior to Earle v. Cobb (and apparently even afterwards as evidenced by the decision in Stinson), many insurance defenses lawyers subscribed to the view that if the UIM carrier does not participate at trial and agrees to be bound by the verdict, then the jury need not be told of the UIM claim or of the UIM presence and potential secondary liability.   In Stinson, the trial court ordered the case to be tried without mention of liability insurance or underinsured motorists coverage.

The matter was highly contested and involved an intersection collision.  Stinson and Mattingly had claims against each other, and the Mattingly claims settled prior to trial.  Stinson, however, was seriously injured with over $500,000 in medicals and brain injuries;  he could not recall the accident.  Experts testified aplenty, and the trial judge granted a defense motion not to identify UIM or KFBM at trial.  A defense verdict ensued, followed by this appeal by Stinson.  Judge Abramson and COAKY reversed and remanded the trial court decision.

In sum, in Earle v. Cobb, our Supreme Court ruled that it is reversible error not to inform the jury that a plaintiff’s UIM carrier is a named defendant to the plaintiff’s suit. Although this case does not involve a Coots settlement with the alleged tortfeasor, as did Earle, that difference does not allow for a different result given the rule and rationale Earle announced. Under Earle, the trial court’s failure to apprise the jury of Stinson’s claim against his UIM carrier, Kentucky Farm Bureau, was an error, and under Earle and Hughes v. Lampman that error requires reversal for a new trial because the error cannot be deemed harmless, despite a defense verdict.

With regard to the mention of insurance, Judge Abramson noted:

It is true, of course, as Mattingly and KFB point out, that under this post-Earle approach trials may also be tainted by gratuitous references to insurance when insurance should have absolutely no bearing on the jury’s findings as to liability and damages. If Earle is truly, as it appears to be, the harbinger of a new era of disclosure regarding insurance in our courts, then to guard against this countervailing taint, trial judges may increasingly find it necessary to admonish the jury that they must completely disregard insurance when determining whether liability and damages have been proven. Such admonitions, perhaps, will remind the jury that they are fact finders and should not be swayed by who will pay the bill.

Ed Brutscher at the Kentucky Tort and Insurance Law Blog (click here for post) takes issue with Judge Abramson's opinion in his post on two points.  First -

What I [Ed Brutscher] do disagree with is the language used to circumvent the clear rule against mentioning liability insurance at trial. Claiming that the failure to identify the UIM carrier is akin to tainting our court system with "deception" or "subterfuge" is ridiculous.  Our entire Rules of Evidence are based on "deception" and "subterfuge." Here is a book dedicated to keeping information from the jury.

Ed is correct that the Kentucky Rules of Evidence do keep information from the jury, but they also control that information which is relevant to the inquiry.  And the exclusion of evidence in many of these rules is based on policy decisions (as many rules are).  For example, the various privileges keep out incredibly reliable and relevant information.  Otherwise, we could short circuit the trial and ask the defense lawyer "did your client admit to you he committed the crime".  Attorney client relationships and other privileges are in the Kentucky Rules of Evidence to protect higher values, and thus keep certain information from the jury.  See Article V, KRE.

However, the rule against insurance taint is not based upon the mere mention of the word, but rather upon using "insurance" to prove liability.   KRE 411 - "Evidence that a person was or was not insured against liability is not admissible upon the issue whether the person acted negligently or otherwise wrongfully. This rule does not require the exclusion of evidence of insurance against liability when offered for another purpose, such as proof of agency, ownership, or control, or bias or prejudice of a witness."

The next area of concern raised by Ed in his post is:

I also disagree that this is the "harbinger of a new era of disclosure regarding insurance in our courts." Health and disability insurance are still prohibited from being mentioned by the collateral source rule. What about the "deception" or "subterfuge" of this rule [?]

Well, Earle v. Cobb would have been the "harbinger" or sign of things to come, and this honor does not rest solely on Simpson v. Mattingly (see two decisions below the fold that are post-Earle).

However, when it comes to the mention of insurance at trial, I am always surprised by this juxtaposition - liability insurance in Kentucky is mandatory and UIM and UM must be offered to insureds versus the selection of competent and fair jurors who are unbiased. 

Do we really want a jury of the unaware, the ignorant, or the uninsured?  Those who are either unaware of the insurance law requirements or are able to avoid the requirements of being insured? 

The problem with insurance is not its mention, but how all the lawyers, judges and rules try to spoonfeed the jury on the effects of insurance and avoid its mention because we think its not relevant (but the real reason is undue prejudice) and thus permit the jury to their own vices or devices.  Then when the juror asks the question on insurance such as "are his/her bills paid by insurance?", the judge refuses to answer the question and the juror wonders what did he/she say that was wrong.

The collateral source rule is not a deception but rather a policy decision by the courts that a tortfeasor does not benefit from the injured party's foresight in being insured; bills are bills, and who pays them is not a benefit to be reaped by the party who caused the injuries.  How would you admonish the jury?  Surely, this is a collateral rule on a collateral consequence that confuses the issue.  For example (and in jest):

The jury is advised that the plaintiff's medical bills have been paid, all or in party, by his health insurance and this recovery will be forked over to his insurer to the extent of any subrogation and reimbursement rules in that policy which may very well have a priority over any recovery for other damages and without compensating the plaintiff's lawyers for his time and efforts in effecting this recovery?

All in all a good issue and analysis by Ed, but as can be plainly seen, we are in disagreement in principal.  Iwill admit that I am somewhat surprised that the Court of Appeals would go this way in a non-advancement situation.  However, I can fully appreciate that the intricate rules created to favor of the insurance companies, and we have seen the "harbinger" in Earle v. Cobb and the signs of the times are now here.

This will be a tough call for SCOKY.  It's a new group, and they now have to apply an old but recent development in the law that they did not write.  I can see them going either way on Stinson, but sooner or later the prediction/concerns of Judge Abramson will need to be addressed - not just in the UIM/Coots situation - but when will we accept the fact that "insurance" is not a dirty little word to be kept in the trial clost. 

Insurance is a fact of life in indemnifying all of us for major losses.  There is disability, health, life, UIM, UM, liability, excess, umbrella, commercial, government, and other types of insurance that can pop up in litigation.  Time to deal with it.

In the form of a "by the way on this case", I submit to you that the legal cast from Stinson was noteworthy as Stinson was represented by Jason Bell from a firm (Derrick Stivers and Coyle) which also does significant insurance defense and represents Hardin Memorial Hospital in medical negligence matters.  The trial judge was Judge Janet Coleman whose husband is Jerry Coleman who has a significant insurance defense practice in Hardin County with the firm of Quick and Coleman.  The attorney representing Kentucky Farm Bureau was James Howard who was appointed to the Court of Appeals to fill the vacant seat of Judge Robert Dyche and is up for election in 2007 and was formerly associated with an insurance defense firm.   And finally, Mattingly was represented by Waye Carrol from the firm of McKenzie and Peden an insurance defense firm.   

This goes to show you that even though all the counsel had strong insurance defense ties, Jason Bell represented his client aggressively and forcefully on this issue.  Or another way is "All the insurance lawyers and all the insurance men, could not put the word insurance back into the hidden bin."

For background on these issues, see Earle v. Cobb and the UIM Conundrum and Trial Practice: Paradigm Shift and Jury Trials After Earl v. Cobb.

Legislation pending in Kentucky House to do away with the "contact rule" for uninsured motorist benefits

Rep. Darryl Owens of Louisville has proposed legislation whose time has come - eliminating the "contact rule" for uninsured motorist benefits when hit by an "unknown motorist".  This is sometimes referred to as the "hit and run" rule, but in that situation coverage is provided since there has been a "hit" or contact.

The contact requirement is historically an outgrowth of the insurance industry's efforts to reduce fraud.  However, the contact rule would have denied uninsured motorist benefits even if the accident had been caught on tape and witnessed by half of Louisville during Derby week!

For example, in recent news story, a young man was run off the interestate by an unknown trucker.  He crossed the center line and was struck by a police officer.  Result - no contact, no known driver, no coverage.

The no contact rule has also produced the bizarre situation where one insurance company was able to deny coverage to its insured's estate in a fatality caused by an unknown, but no contact, motorist, but then the insurance company was able to use the unknown motorist to shift the fault in defense of the underinsured motorist claim arising from the negligence of the third driver who actually did make contact with the insured's car killing one and seriously injuring the other!

Here's the pending legislation:

House Bill 271 (Expand Definition Of Personal Injury Accident):

Introduced by Rep. Darryl Owens on February 6, 2007, to establish that physical contact is not required to recover damages in personal injury or wrongful death claims arising from certain vehicle accidents.

Details and Comments: http://www.kentuckyvotes.org/Legislation.aspx?ID=51087

See,

KENTUCKY FARM BUREAU MUT INS CO V. RYAN
INSURANCE - Uninsured motorist; Underinsured motorist
CIVIL PROCEDURE - Apportionment, Warning order attorney
2003-SC-000944-DG.pdf
Published, reversing, JOHNSTONE
Date: 11/23/2005

The basic holding permitted a UIM carrier to third party an unknown motorcyclist defendant for purposes of apportioning fault even though there was no personal jurisdiction over that unknown motorcyclist.  An odd twist in this case was that the UIM was also a UM carrier and was permitted to use the 'no contact' rule to defeat the plaintiff's claim for uninsured motorist benefits.

Comment:  However for now, note the inconsistent positions permitted KFBM in talking what were essentially inconsistent positions by parsing the policy provisions and not reading the policy as a whole and ignore the intent and purpose of the 'no contact' rule to prevent fraudulent claims.  Justice Johnstone wrote for the majority and made some black letter law pronouncements that a UIM claim is not controlled by the apportionment statute since it is a contract and not a tort and its tweener status (my word not his) does not change that fact.  However, in a UIM case the damages are in tort and the third party claim for apportionment is permitted.  Of course, would a constructively served third party complaint suffice if a direct action against the tortfeasor?  Time will tell on that one, but in that scenario I would suggest a motion to dismiss by the plaintiff for failure to state a cause of action since indemnity in this situation is non-existent and apportionment is a legal conclusion and not a claim, Kevin Tucker case notwithstanding in creating the legal fiction.

SCOKY Oral Argument on 2/16/07 re: insurance defense lawyer's impeachment of plaintiff's testifying doctor with evidence of loss of medical licensure

From SCOKYBLOG is the following update on oral argument with SCOKY set for 2/16/2007 on a underinsured motorist case with two twists. First twist is the insurance defense lawyer's impeachment of plaintiff's testifying expert by the fact that the doctor's license was revoked just prior to trial.  Second issue of note involves trial court granted directed verdict against plaintiff on permanent impairment of power to labor and earn money.

Note this is SCOKY so a decision last Oct 2006 at COA which was unpublished and which reversed on the question of asking about an expert doctor's loss of medical license is not that helpful.

10:00 a.m. REECE V. NATIONWIDE MUTUAL INSURANCE, CO. (2005-SC-79-DG) “Personal Injury. Auto Insurance. Evidence. Instructions. Issues include whether plaintiff seeking recovery on under-insured-motorist policy was entitled to jury instruction on damages for permanent injury or permanent impairment of ability to labor and earn money; whether plaintiff was entitled to exclusion of evidence that her treating physician’s medical license had been suspended prior to trial; and whether trial court improperly limited plaintiffs questioning of prospective jurors during voir dire.”

Discretionary review granted 2/15/2006
Jefferson Circuit Court, Judge Ann Shake
For Movant: John K. Carter
For Respondent: Michael E. Krauser and Edward Alan Brutscher

Appellant’s Brief

Appellee’s Brief

Appellant’s Reply Brief

Insurance: No contact, no known driver, no claim for uninsured motorist benefits

Op-Ed (Ins.): No contact, no known driver, no claim for uninsured motorist benefits posting at www.KentuckyLawBlog.com.

Regular Use Exclusion Applied by COA in NPO Decision

The Court of Appeals issued a nonpublished decision on Oct. 20, 2006 upholding the "regular use" exclusion in an underinsured motorist's policy with State Farm.

This genesis of this case is a fatal pickup truck accident that killed two brothers, Paul and Aaron Williams, the sons of Sanford Williams. The substantive issue raised on appeal is whether the State Farm Mutual Automobile Insurance Company’s policy issued to Sanford Williams and his wife, Patty, excluded underinsured motorist coverage to the estate of Paul Williams, a passenger in the pickup operated by Aaron.

State Farm paid to Paul's estate its $25,000 liability limits covering the negligence of Aaron the driver.  The question that arose was the availability of underinsured motorist benefits under other vehicles in the Williams' household.  The truck Aaron was driving was in his parents' name but the insurance was in his name andhe paid most of the insurance premiums.

At the time of the accident, Paul as a full time student at UK and listed as a driver on one of the Williams' other vehicles, but he neve drove Aaron's truck.

The definition of an underinsured vehicle in the State Farm policies stated "that an underinsured vehicle does not include a land motor vehicle “furnished for the regular use of you, your spouse, or any relative.” “Relative” is defined as a person “related to you or your spouse by blood...who resides primarily with you. It includes your unmarried and
unemancipated child away at school.”

Consequently, under the terms of this policy exclusion, UIM benefits were not available to Paul's estate since the truck driven by Aaron was furnished for Aaron's regular use and Aaron was a relative.

The Court of Appeals applied the exclusion to the facts in this case and noted

It is now well accepted that regular-use exclusions from underinsured motorist coverage are not against public policy and are enforceable.“The justification for the regular use exclusion is not the possibility of collusion, but rather the fact that the insured or another family member has control over how much liability coverage is purchased.”

And relied upon Murphy v. Kentucky Farm Bureau Mut. Ins. which addressed "owned or furnished" language in the exclusion, and were not persuaded that made a differenc.

where the court held that an estate of a child killed in an accident while a passenger driven by his brother and owned by the child’s mother, could not recover under the underinsured provision. The policy in that case provided that the benefits were excluded if the underinsured vehicle was “owned by or furnished or available for the regular use of you or any family member.”

Judge Barber dissented believing the "owned" portion made a difference and the truck was not furnished for regular use. 

Here is the case:  Williams v. State Farm Ins. 2005-CA-001646.

Just a reminder in the analysis of exclusions to insurance coverage to note that the "regular use" exclusion did not negate any compulsory coverages required by law such as minimum liability limits and reparation benefits.  UIM and UM are coverages that must be offered by statute and the insurers are permitted reasonable exclusions not inconsistent with the statutory provisions.  Applicability of such exclusions as "regular use" and "resident non-relatives" might be violative of statute and minimum coverages.  The latter exclusion is found often in Safe Auto policies in Kentucky applicable to liability, UIM, and PIP.

Here the estate was trying to make a distinction that Aaron's truck really was not owned by the Williams or used regularly by the Williams family members.  Paul did not drive the truck either.  However, the literal language of the exclusion was that the truck was clearly furnished to a relative of Paul (his brother), and it need not be owned by Paul or driven by Paul.  The next portion of the exclusion was "relative" and Paul was related to Aaron and his parents, but I am not convinced that Aaron resided in Paul's household since Paul was in college and an adult.  The unmarried and unemancipated language in the exclusion did not apply either since that was limited to the child of the "you" in the policy (eg., Paul).

A harsh result which was factually delineated well by the Estate's lawyer to avoid the grasp of the exclusion.  However, the detailed analysis was lost upon this panel, and even though Barber dissented, he disagreed on another more salient point - the truck was not owned by Paul or furnished for Paul's regular use even tho legally owned by his parents, equitably owned by his brother Aaron, and the insurance purchased and paid for by his brother.  The KFBM case was not relavant to the factual distinctions made here.