True vs. Raines, Ky., 99 S.W.3d 439 (2003)—UIM Subrogation

Burton v. Farm Bureau Ins. Co., Ky., 116 S.W.3d 475 (2003)—Physical Contact Requirement

A truck driver was injured when he drove his employer’s Mack semi-trailer truck off a public highway into a ditch. He claimed he was trying to avoid striking an unidentified red automobile that crossed the center line of the highway and was approaching him from the opposite direction in his lane of travel. No physical contact occurred, although an independent eyewitness verified the truck driver’s version of the accident. The truck driver filed an action against his personal automobile insurance carrier, Farm Bureau, and the insurer of the Mack truck, U.S. Fire, seeking to recover UM benefits. Both insurance policies contained “physical contact” provisions which required contact as a condition precedent to coverage. The circuit court granted summary judgment in favor of both insurers, based upon the physical contact requirement. The Court of Appeals affirmed. The Supreme Court granted discretionary review to consider whether the physical contact requirement violates the public policy expressed in Kentucky’s underinsured motorist statute, as the driver claimed. The Supreme Court held the physical contact requirement in both hit-and-run provisions of the underinsured motorist endorsements do not violate the public policy expressed under Kentucky’s underinsured motorist statute. The statute does not require coverage for damage caused by an unidentified motor vehicle and individual insurers may, by contractual definition, provide coverages in addition to those required by statute. The Supreme Court noted the purpose of the physical contact requirement is to protect the insurer from fraudulent claims arising in cases where the insured’s injuries are the result of his own negligence. The fact a witness was available to verify the driver’s claims was insufficient. The Supreme Court said to hold otherwise could subject an insurer to a fraudulent claim if the alleged eyewitness was also a party to the fraud.

Nationwide Mutual Insurance Company v. Hatfield, Ky., 122 S.W.3d 36 (2003) – UM Coverage/Government-Owned Vehicle Exclusion

Mr. and Mrs. Hatfield, now deceased, were traveling in Missouri when their vehicle was struck by a fire truck owned by the City of Montgomery.  The driver of the fire truck was found responsible for the accident.  The executor of the estate of Mr. and Mrs. Hatfield filed a claim against the driver’s insurer and recovered $100,000.00 each in damages, the maximum amount allowed by Missouri law.  (The municipality had sovereign immunity, except to the extent the governmental body purchased liability insurance for tort claims).  The amounts recovered by the estate did not cover the aggregate damages caused by the accident and the estate filed a claim with Nationwide to collect underinsured motorist coverage.  Nationwide argued the policy language excluded accidents involving government owned vehicles and that the language requiring damages be “due by law” before payment is required under the policy is controlling.  The Nationwide insurance policy was purchased in Kentucky.  The Circuit Judge granted summary judgment in favor of Nationwide and the Court of Appeals reversed and remanded, finding the government owned vehicle exclusion was against public policy. 

The Supreme Court of Kentucky was called upon to determine whether the Hatfields may recover under their underinsured motorist policy after receiving the maximum award permitted by Missouri law, and whether the government owned vehicle exclusion is against public policy.  The Kentucky Supreme Court held an insurance policy provision that excludes government owned vehicles from underinsured coverage is against public policy and is therefore void and unenforceable.  The Supreme Court rejected Nationwide’s argument that because the City of Montgomery is protected from monetary liability by the doctrine of sovereign immunity, the language in the policy exclusion precludes the estates’ claims.

Earle v. Cobb, Ky., 156 S.W.3d 257 (2004) – Subrogation/Underinsured Motorist Coverage

The plaintiff, Earle, the tortfeasor, Cobb, were involved in an automobile accident on February 17, 1998.  The plaintiff was injured and sought recovery of underinsured motorist benefits from Indiana Insurance Company.  Plaintiffs sought damages for medical expenses, lost wages, and pain and suffering.  Indiana Insurance filed a cross claim against Cobb for indemnity.  Prior to trial, Cobb’s liability carrier, Hartford Insurance Company offered its policy limit of $25,000.00 to the plaintiff in full settlement of her claims against Cobb.  Earle accepted this sum and Indiana Insurance elected to preserve its subrogation rights against Cobb by pursuing the Coots procedure of substituting its payment for Hartford’s (liability carrier) proposed $25,000.00 settlement. Thus, Cobb was not released and she remained a party defendant. 

The case went to trial and the Court ordered plaintiff’s claims against Indiana Insurance for UIM benefits be determined after the jury rendered a verdict.  The trial court also held the existence of UIM coverage provided by Indiana Insurance could not be revealed to the jury.  Thus, Indiana Insurance was not identified as a party, did not participate at trial, and agreed to be bound by the jury verdict.  Indiana Insurance did defend by participating in pretrial motions and discovery.  During deliberations, the jury asked the trial Judge whether insurance was involved or if the amount was coming from Ms. Cobb.  The trial Judge declined to answer the juror’s question.  The jury returned a verdict which awarded plaintiff $500.00 for pain and suffering, $500.00 for past medical bills, and $500.00 for lost wages and judgment was entered.  Plaintiff appealed and Cobb cross-appealed. 

The Court of Appeals affirmed the trial court’s holding.  Earle was granted discretionary review and the Supreme Court considered whether an underinsured motorist carrier must be identified at trial when it chooses to preserve its subrogation rights by means of the Coots procedure.  The Supreme Court held the UIM carrier should be identified as a party because it was named as a party by virtue of its contract and because it chose to retain its subrogation rights by substitution of its payment for the liability insurance carrier.  The case was reversed and remanded for a new trial.  The Court stated, precedence, parity, and fairness dictate that the Supreme Court of Kentucky put an end to “charades and legal fictions, and treat UIM and UM carrier the same.”  The Court held a failure to identify to the jury a named party defendant at trial that is also the plaintiff’s UIM carrier is reversible error.

Shelter Mutual Insurance Co. v. Arnold, Ky., 169 S.W. 3d 855 (2005)
Hit and Run
Arnold was injured in a chain-reaction automobile accident involving three vehicles; one driven by Arnold, another driven by Lee and a third whose driver immediately left the scene of the accident and was never located.  The unidentified vehicle struck Lee’s vehicle propelling it into Arnold’s vehicle.  There was no direct contact between the unidentified vehicle and Arnold’s vehicle.  Arnold brought an uninsured motorist claim against Shelter Mutual, whose policy provided:

Uninsured motorist vehicle means:

***

a hit and run motor vehicle,

Hit and run motor vehicle means a motor vehicle whose owner or operator cannot be identified and which hits the insured or a motor vehicle the insured is occupying. 

The Supreme Court considered whether the “hit” requirement in Shelter’s definition of a “hit and run motor vehicle” is satisfied when a hit and run motorist hits an intermediate vehicle causing it to hit the insured vehicle.  The Supreme Court held it is. 

Aetna Casualty & Surety Co. v. Commonwealth, Ky., 179 S.W. 3d 830 (2005) - Insurance for Pollution Claims

This case arises from low level radioactive waste contamination caused by rainwater penetration into large, unlined trenches at the Maxey Flats Chemical and Nuclear Waste Disposal Facility.  Thirty-six insurance companies, members of the American Nuclear Insurers (ANI), raised the defense of “fortuity” and denied an initial defense and indemnity to insureds in connection with administrative proceedings by the Environmental Protection Agency for clean up of the contaminated site and abatement of contamination.  ANI filed a declaratory judgment action seeking to establish no coverage liability.  Insureds filed counterclaims for coverage under the policies and money damages for ANI’s alleged breach of contractual duties to defend and indemnify them.  All parties filed cross-motions for summary judgment and the trial court summarily ruled ANI’s duty to defend the insureds was triggered by the EPA’s notice of proceedings.  ANI’s fortuity defense to coverage proceeded to trial and a jury found the insureds were precluded from recovery since their share of remediation costs were “expected, and intended, anticipated or foreseen” in the ordinary course of operating the facility under regulatory compliance.

The Supreme Court held fortuity must be judged using a subjective standard.  The crucial issue is whether the insured was aware of an immediate threat of the injury for which it was ultimately held responsible and for which it now seeks coverage, not the insured’s awareness of its legal liability for that injury.  The Supreme Court held ANI was required to reimburse the insureds for their costs in participating in the EPA administrative process, and that the insureds’ costs of site measures are “damages because of property damage” as defined within ANI’s policies.  The Supreme Court held ANI’s policies do not cover attorneys fees incurred in the declaratory judgment action.  The Supreme Court agreed with the lower courts’ decisions to pro-rate the amount of insurance available to cover the limits of ANI’s policies in effect at any time the property damage at issue was caused.

York v. Kentucky Farm Bureau, Ky., 156 S.W. 3d 291 (2005) - Permissive Use

At the time of a single car accident, Kentucky Farm Bureau provided policies to Neely and York.  In defiance of Neely’s wishes York drove away with Prewitt in the passenger’s seat and ultimately wrecked the vehicle.  Prewitt sustained injuries as a result and York later pled guilty to reckless driving and unlawful operation of a vehicle.  The York and Neely policies contained the following exclusion:

We do not provide liability coverage for any person:
Using a vehicle without a reasonable belief that a person is entitled to do so. 

Farm Bureau filed a declaratory judgment action seeking to absolve itself of liability coverage under the exclusion.  The circuit court concluded the exclusionary language applied to the Neely policy, but did not apply to the York policy.  The Supreme Court held no ambiguity existed in the non-permissive user exclusion.  The Supreme Court held the non-permissive user exclusion in the York insurance policy unambiguously excluded coverage.  

Ryan v. Pa. Life Ins. Co., 123 S.W.3d 142 (2003)—Policy Interpretation

Plaintiff suffered fatal injuries when the tractor he was operating on his farm tipped over. His widow, the beneficiary of his life insurance policy, filed a claim for benefits. The policy provides for three different levels of benefits: (1) accidental death (to receive $500 per month); (2) motor vehicle accidental death ($2,000 per month); and (3) bus, train or airline accidental death ($1,500 per month). The largest applicable benefit is payable under the policy. The policy defined motor vehicle as “a four or more wheeled vehicle which is self-propelled and is designed to run on the public highway. This definition does not include motorcycles; motor scooters; motorized bicycles; three-wheeled all-terrain vehicles (ATVs), snow mobiles; dune buggies or other off-road vehicles not meeting highway use specifications; vehicles while being used for racing or demolition derbies; law enforcement vehicles or fire department vehicles.” The trial court granted summary judgment in favor of the estate, relying upon the legal maxim expression unius est exclusion alterius. This rule of statutory construction holds that to express or include one thing implies exclusion of the other, or the alternative. A trial court concluded the policy’s failure to expressly include “tractor” from the “meaning of motor vehicle” implied that it was included in the definition. The court of appeals found no ambiguity in the policy and reversed the trial court’s decision. The Supreme Court of Kentucky agreed this rule of statutory construction does not apply in this case. It cites the catchall provision in the definition which excludes “other off-the-road vehicles not meeting highway use specifications.” The Supreme Court also found the trial court incorrectly construed the construction clause to provide coverage. Exclusion clauses do not grant coverage; rather, they subtract from it. The Supreme Court held a farm tractor is excluded under the plain meaning of the policy’s catchall exclusion and because farm tractors, as a category, are “off the road vehicles that do not meet highway use specifications.”