Kentucky adopted a no-fault system for auto B.I. claims in 1974. The intent was to simplify the claim process for both claimants and insurers alike. As many people who handle PIP claims will attest, that goal has not always succeeded.
Most Kentucky auto policies only provide $10,000.00 in PIP benefits, so typically a PIP claim on its own has limited value. PIP claims, however, can pose a trap for the unwary claims person if the governing statutes are not properly followed
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WHEN DOES PIP COVERAGE APPLY?
A PIP claim will potentially arise whenever there is an accident with bodily injury and either the injured person, or the owner of the vehicle they were occupying, maintains a Kentucky auto policy and has purchased the coverage. (K.R.S. 304.39-030). This will be true even if the accident did not happen in Kentucky. (K.R.S. 304.39-030).
If an out-of-state motorist is involved in an accident while in Kentucky, they will still be able to assert a PIP claim by one of two means. If their insurer is authorized to do business in Kentucky, then under Kentucky law, the policy provides PIP coverage, by operation of law. (K.R.S. 304.39-100). In other words, even though the PIP coverage was not actually purchased by the insured, it will nevertheless be found to exist. If the insurer does not do business in Kentucky, then the occupants of the vehicle may make a claim to the Assigned Claims Plan maintained by the Kentucky Department of Insurance. Under this plan, the Department of Insurance will designate a particular insurer, who already does business in Kentucky, to step in and provide the coverage. (K.R.S. 304.39-160).
WHO MAY MAKE A PIP CLAIM?
Drivers and occupants of insured vehicles may make a PIP claim.
PIP coverage is not limited to just the occupant of a vehicle. It also applies to people who are entering, exiting, repairing, and loading or unloading a motor vehicle. These types of claims will often revolve around very fact specific determinations. (K.R.S. 304.39-020).
A pedestrian in Kentucky may make a PIP claim regardless of whether they are insured. A Kentucky resident who is injured as a pedestrian in another state may make a PIP claim under their own Kentucky policy.
If an accident involves an uninsured motorist, any amount of PIP recovery cannot be used to reduce the amount of UM coverage available.
WHAT TYPES OF DAMAGES CAN BE RECOVERED ON A PIP CLAIM?
K.R.S. 304.39-020 governs what types of damages can be paid on a PIP claim. Medical expenses are the most commonly claimed item on a no-fault claim. The Kentucky courts historically have taken a very liberal approach in determining whether treatment is reasonably needed and/or causally related to an accident. Insurers do have the right to collect medical records from a provider in making any determination of necessity. If an insurer believes an IME is warranted, they have the right to petition the circuit court to order an IME, even if the claim is not otherwise in litigation.
Lost wages are another commonly claimed item on PIP claims. This will require a statement from the employer regarding the employee’s income and work history, along with a statement from the treating doctor regarding the claimant’s inability to work.
Funeral and burial expenses are ordinarily only covered up to $1,000.00. Certain policies do contain a provision expressly providing additional coverage for funeral and burial expenses.
There are other types of damages which can be claimed and recovered on a PIP claim which do not often receive a great deal of attention. One such area is replacement services. This applies whether the claim simply involves bodily injury preventing someone from ordinarily doing work around the home, or if the accident causes the death of someone who ordinarily provided certain services around the home. Examples include expenses for child care, housekeeping, and lawn care. These types of claims are capped at $200.00 per week.
One other type of claim is for a survivor’s economic loss. This is where a decedent had previously been financially supporting another.
WHO CONTROLS WHICH BILLS GET PAID?
PIP claims in Kentucky are self-directed. This means it is solely up to the insured to decide how the coverage is to be allocated. (K.R.S. 304.39-241). For example on a claim resulting in significant wage loss, the insured has the right to have as much of the medical expenses paid by health insurance as they would like, and then secure as much wage loss reimbursement under the policy as possible.
If an insured has multiple policies, each of which provide basic no-fault coverage, those policies cannot be stacked. If, however, the insured has opted to purchase additional no-fault coverage beyond the basic $10,000.00 level, then to the extent any additional coverage was purchased, the amount of additional coverage can be stacked.
In instances where an out-of–state policy is involved, there could very well be a scenario presented where there is medical payment coverage expressly provided by the policy, and no-fault coverage also available by operation of law. When this happens, the medical payment coverage is not eliminated, rather both coverages are available and the insured has sole discretion to determine what they wish to claim under each coverage.
WHEN MUST NO-FAULT BENEFITS BE PAID?
Kentucky law is strict on imposing specific time limits for paying PIP claims. Ordinarily a claim must be paid within thirty days of it being received by the insurer. (K.R.S. 304.39-210). An insurer may opt to accumulate bills on a claim for a thirty day period, and if they chose to do so, then after that thirty day period, they must then pay the accumulated bills within fifteen days. An insurer is entitled to request and receive reasonable proof that treatment was both incurred and was in fact necessary.
If benefits are not paid in a timely manner, interest is imposed at a rate of 12%. (K.R.S. 304.39-210). If it is determined the delay in payment was without reasonable justification, the interest rate increases to 18%.
WHAT SUBROGATION RIGHTS EXIST?
A PIP insurer has a right of subrogation against the insurer of a tortfeasor or directly against an uninsured tortfeasor. (K.R.S. 304.39-070). The PIP insurer has no right to assert a direct subrogation claim against an insured tortfeasor. (K.R.S. 304.39-050). The first one thousand dollars ($1,000.00) paid on a PIP claim is exempt from subrogation.
Kentucky follows the made whole rule. (K.R.S. 304.39-140). When a plaintiff has not been fully compensated by the tortfeasor, the PIP insurer’s subrogation lien is extinguished as a matter of law. In other words, the insured’s claim takes priority over the insurer’s subrogation claim. Kentucky also mandates is that if the plaintiff recovers policy limits from the tortfeasor’s insurer, not only does that extinguish the subrogation lien, but there is also no recourse against the insured tortfeasor. (K.R.S. 304.39-140).
If an insurer relies upon the plaintiff's attorney to recover its subrogated interest, then the plaintiff's attorney may assert a claim for reasonable attorney’s fees to the insurer. (K.R.S. 304.39-2201). The test generally followed by the Kentucky courts is whether that attorney’s services provided a benefit to the insurer. The extent to which this may be recovered is a fact specific determination and is ordinarily addressed on a case by case basis.
HOW DOES THIS EFFECT A B.I. CLAIM?
With the adoption of no-fault law, Kentucky has imposed thresholds a plaintiff has to meet before they can bring a B.I. suit. (K.R.S. 304.39-060). These thresholds are:
- $1,000.00 in medical expenses;
- Permanent disfigurement;
- A compound, comminuted, displaced, or compressed fracture;
- A fractured bone;
- The loss of a body member;
- A permanent injury;
- The permanent loss of a bodily function;
- Death.
These thresholds have not changes since 1974. A monetary threshold of $1,000.00 was much more meaningful over thirty years ago than it is now. Additionally, the courts have been very liberal in addressing what is a permanent injury, and chiropractor reports on very basic soft tissue claims involving only several weeks of treatment have been given sufficient deference to result in a finding of permanency.
A tortfeasor is immune from a plaintiff’s first ten thousand dollars ($10,000.00) in economic damages, regardless of whether a PIP claim is made, or if the coverage is exhausted. This set-off is made post verdict.
Kentucky’s no-fault statutes, and the great body of case law interpreting it, cannot easily be condensed into one article. The purpose of this article is to provide a general survey of this often misunderstood area of law. For more specific information, please feel free to contact our firm.
